The Relation Between Invesment And Literacy Rate On Economic Growth In Indonesia From 1998 To 2022

Abstract

Constant economic growth is growth that is bolstered by investments. Economic growth will be impacted by the rise in the average length of education indicated by a high literacy rate (AMH). This is why the purpose of this study is to investigate the relationship between economic growth, investment, and literacy rates. To observe changes in any variable, such as Indonesia's GDP, investment, and literacy rate (AMH) from 1998 to 2022, descriptive analytic techniques are employed. The study of the Vector Error Correction Model (VECM) is the inference method used to determine the link between the variables that are represented by economic growth indicators. The variables employed in this study include the growth of the GDP, which serves as an indication of economic growth, investment (I), and the literacy rate (AMH), which serves as an indicator of education level. The examination of the VECM equation leads to the conclusion that the GDP indicator, which measures Indonesia's economic growth, positively correlates with the amount of iinvestment and literacy rates. According to IRF and FEVD research, economic growth responds to shocks that affect it or the other three variables by fluctuating at the start of the period and reaching an equilibrium point at various points in time. This implies that shocks to the average investment level will no longer have an impact on economic growth after the fourth period. In the tenth period, the amount of investment will start to decline as a reaction to shocks resulting from either economic growth or from itself. This implies that beyond the tenth period, the quantity of investment or shocks to economic growth won't have a significant impact on each other. In the second stage, the amount of investment will start to decline in reaction to shocks caused by the average literacy rate. This implies that shocks to the average literacy rate will not significantly affect the amount invested after the second term.