Remittance, Economic Growth and Household Consumption in Indonesia

AGUS EKO SUJIANTO, 197108072005011003 and MASHUDI, 196901312001121003 (2018) Remittance, Economic Growth and Household Consumption in Indonesia. KnE Publishing, 2018 (1). pp. 422-436. ISSN 2518-668X

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Abstract

International migration is not only affects population movements but also increases cash inflows in the form of remittances to encourage increased macroeconomic indicators such as consumption, economic growth and Gross Domestic Product. The purpose of this research is to examine the relation of causality of remittance, economic growth and consumption in Indonesia. The research data was collected from the publication of the World Bank from 1983 to 2016. The test of stationarity data of research variables was taken by using Augmented Dickey-Fuller test statistic concluded that stationary data at the 1th level difference. The 2 optimal lag length is based on the Likelihood Ratio test, Final Prediction Error, Schwarz Information Criterion and Hannan-Quinn Information Criterion. Cointegration test results have a long-term relationship by comparing Trace Statistic value and maximum eigenvalue with Critical Value (5%). While the Granger Causality Test results, there is no causality relationship of research variables. However, there is a one-way relationship of remittance to consumption which means that the increase in remittances statistically encourages household consumption expenditure. Household consumption expenditure also boosted economic growth especially in Indonesia within 34 years from 1983 to 2016.

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