Appendixاا1.4اMulticollinearityاTest...ااا71
Appendixاا1.5اNormalityاTest...ااا73
CHAPTER 1
INTRODUCTION
1.1.1 Background
increase ا in ا income ا or ا we ا called ا economic ا growth. ا Economic ا growth ا and ا economic development اareا almostا same ا but ا they ا are ا fundamentally ا different. ا Economic ا growth ا is increaseاinاaverageاincomeاofاanاeconomy,اwhileاeconomicاdevelopmentاisاtheاincreaseاin welfareاofاpeopleاofاthatاeconomy.
EconomicاGrowthااisاanاincreaseاinاaاcountry'sاrealاlevelاofاnationalاoutputاwhichاcan be ا caused ا by ا an ا increase ا in ا the ا quality اand اquantity ا of ا resources, اanا improvement اin technologyا orاinاanotherاwayاanاincreaseاinاtheاvalueاofاgoodsاandاservicesاproducedاby everyاsectorاofاtheاeconomy.ا
EconomicاGrowthاcanاbeاmeasuredاbyاanاincreaseاinاaاcountry'sاGDPا(grossاdomestic product).ا“Economicاgrowthاisاaاprocess,اnotاanاeconomicاpictureاinاaاgivenاperiod,اthereاare developmentاorاchangesاandاuseاofاtime”ا(Boediono,ا1992).
Indonesia’s ا economic ا growth ا has ا beenا up ا and ا down ا in ا over ا recent ا decades, ا in accordance ا with ا the ا conditions ا of ا the ا world ا economy. ا National ا income اis ا a ا measure ا of economic ا growth, ا which ا isا showed اbyا fluctuating ا growth. ا The ا economic ا condition ا of Indonesia ا as ا a ا developing ا country ا has ا not ا reached ا steady ا state ا conditions ا in ا which ا an economyاisاalreadyاinاaاstableاandاlessاsusceptibleاtoاshocks.
budgetاtheاgovernmentاhasاbeenاableاtoاanticipateاtheاsituation,اsoاthatاeconomicاgrowthاin Indonesiaاisاrelativelyاsafe,اaroundا6,38%ا(DataاBPS,ا2008).
اIndonesiaاisاbetterاequippedاtoاsurviveاinاthisاtimeاofاcrisisاbecauseاofاtheاexperience learnedاfromاpreviousاcrisis.اAاcountryاmustاhasا aاgovernmentاthatاservesاasاaاeconomic dampening ا and ا political ا turmoil ا both ا from ا domestic ا and ا abroad. ا Dampers ا are ا able ا to stabilizeا the ا turmoil ا in ا the ا sense ا of ا aا more ا conducive ا situation ا through ا various ا policies. Governmentاisاaاveryاimportantاactorاinاtheاeconomyاofاaاcountry.اAnاeconomicاactivityاwill beاoptimalاifاthereاisاaاgovernmentاactivityاthereاin.
EconomicاgrowthاinاIndonesiaاisاstillاatاtheاdevelopmentاstage.اGovernmentاspending onاGovernmentاactivitiesاthatاincludeاspendingاinاtheاpoliticalاsphereاasاwellاasاinاtheاfieldاof economyاwhereاeverythingاhasاplannedاinاtheاbudgetاrevenueاandاexpenditureاofاtheاstate budget. ا Managing ا sources ا ofا revenueا and ا governmentا spending, ا governmentا can ا makeا a policyاtoاincreaseاeconomicاgrowthاsuchاasاFiscalاPolicy.
FiscalاPolicyاisاtheاgovernmentاpolicyاwhichاincludedا governmentاexpenditureاand taxesاinاcollaborationاwithاtheاmonetaryاpolicyاwhoseاobjectiveاwasاtoاaccelerateاeconomic growth. ا ا Government ا expenditure ا consists ا of ا recurrent ا expenditure ا and ا development expenditure.
Recurrentاexpenditureاisاexpenditureاthatاusedاforاmaintenanceاandاoperationاofاa government ا that ا includes ا spending ا on اpersonnel, ا goods ا expenditures, اinterest ا payments, subsidiesاandاotherاroutineاexpenses.اThroughاroutine اexpenses,اtheاgovernmentاcanاcarry out ا its ا mission ا in ا order ا to ا maintain ا the ا smooth ا implementation ا of ا the ا government, ا the operations ا and ا maintenanceا of ا state ا assets, ا Government's ا responsibility ا to اthird ا parties, protection ا of ا the ا poor ا and ا underprivileged ا and ا maintain ا economic ا stability (Mangkoesoebroto,ا1994).
Theاfundsاareاallocatedاtoاtheاvariousاfieldsاinاaccordanceاwithاtheاprioritiesاthatاhaveاbeen planned.اTheاroleاofاtheاdevelopmentاbudgetاisاmoreاemphasisاonاeffortsاtoاcreateاaاstable andاconduciveاconditionsاforاtheاcontinuityاofاtheاprocessاofاeconomicاrecoveryاbyاproviding aاstimulusاtoاtheاgrowthاofاtheاnationalاeconomy.اInاconnectionاwithاtheاmanagementاofاthe overall ا state ا budget ا with ا limited ا financial ا resources ا available, ا the ا achievement ا of developmentاgoalsاshouldاbeاasاoptimalاasاpossibleا(NotaاKeuanganاdanاAPBN,ا2004).
Taxesا haveا a ا very ا important ا roleا in ا theا life ا of ا the ا state. ا Particularlyا in ا the implementation ا of ا development ا because ا the ا taxes ا a ا source ا of ا stateا revenueا to ا fundا all expensesاincludingاtheاexpensesاofاgovernment.اWhetherاit'sاforاrecurrentاexpendituresاand developmentاexpenditures.
AccordingاtoاWaluyoا(2006),اhighاeconomicاgrowthاwillاincreaseاtheاrevenueاofاthe governmentاofاtaxesا(VATاandاincomeاtax)اasاwellاasاprovidingاemploymentاandاearningsاor savingاforeignاexchange.
Since ا the ا purpose ا ofا taxationا andا government ا expenditure,ا both ا recurrent ا and developmentاareاtoاsupportاnationalاeconomicاactivityاinاmaintainingاtheاmomentumاofاhigh economicاgrowth,اandاimproveاtheاwelfareاofاtheاwholeاpeopleاofاIndonesia.اThereاforeاthe roleا ofاgovernmentا inا theاfieldاoffiscalا policyا toا accelerateا economicا growth,اtheاauthors triedاtoاexamineااhowاtheاeffectاofاfiscalاpolicyاonاeconomicاgrowth,اinاIndonesia.Inاthisاcase theاgovernmentاfiscalاpolicyاareاgovernmentاexpenditureاandاtaxes.
Basedاonاtheاaboveاassumptions,اFiscalاpolicyاisاaاgovernmentاpolicyاcanاimpactاof activitiesاagainstاtheاgovernmentاinاrunningاinاtheاfieldاofاtheاeconomyاinاindonesia.ااtoاthe authorsاareاinterestedاinاdoingاresearchاtoاtakeاtheاtitleاofا
“The Effect Of Fiscal Policy On Economic Growth : Case Study In Indonesia”.
1.2 Research Question
1. How ا does ا government اrecurrent ا expenditure ا influence ا economic ا growth ا in Indonesia?
2. How ا does ا government ا development ا expenditure ا influence ا economic ا growth ا in Indonesia?
3. HowاdoesاtaxesاinfluenceاeconomicاgrowthاinاIndonesia?
1.3 Research objectives
Inاaccordanceاwithاtheاaboveاproblemsاtheاpurposeاofاthisاstudyاwereاto:
1. Toاexamineاtheاeffectاofاgovernment اrecurrentاexpenditureاonاeconomicاgrowthاin Indonesia;
2. Toاexamineاtheاeffectاofاgovernmentاdevelopmentاexpenditureاonاeconomicاgrowth inاIndonesia;
3. ToاexamineاtheاeffectاofاtaxesاonاeconomicاgrowthاinاIndonesia. 1.4 Research Advantage
Theاadvantages ofاthisاresearchاare:
1. For ا I ا and ا myself, ا to ا improve ا my ا ability ا in ا writing ا report ا and ا doing ا research, especiallyاinاmonetaryاeconomics,اparticularlyاfiscalاpolicy.
2. Forاgovernmentاasاinputاforاfiscalاpolicy.