Analysis of The Positive Effect of Consumption, Inflation, GDP, Unemployment Rate, Balance of Payment, and Interest Rate on Investment

Abstract

This study analyzes the influence of macroeconomic factors on investment in Indonesia. The factors analyzed include consumption, inflation, Gross Domestic Product (GDP), unemployment rate, balance of payments, and interest rates. Secondary data from 1995 to 2016 were analyzed using the Ordinary Least Squares (OLS) method. Results show that consumption and inflation have a negative effect on investment, signaling that an increase in these two factors tends to reduce the interest and ability to invest. On the other hand, higher GDP, a low unemployment rate, and a positive balance of payments contribute to increased investment, suggesting that strong economic conditions and a healthy labor market are catalysts for investment. Interest rates, which have a significant negative effect, confirm the importance of monetary policy in shaping the investment climate. In conclusion, macroeconomic factors play an important role in determining the level of investment in Indonesia. Therefore, to encourage higher investment-which is key for economic growth and job creation-the government should focus on maintaining macroeconomic stability, improving infrastructure, providing attractive incentives for investors, and improving the quality of education and labor. These steps are expected to improve the overall welfare of the Indonesian people.