The Role of Digital Economy in Improving Economic Growth in Indonesia

Abstract

This study aims to determine the role of the digital economy in increasing economic growth in Indonesia. The variables in this study are Labor, Inflation, Investment and Unemployment. The analysis method used in this study is to use the Vector Auto Regression (VAR) model with the Impulse Response Function (IRF) test, Forecast Error Variance Decomposition (FEVD), stationarity test, cointegration test, lag structure stability test, and optimal lag length test. The results of the Vector Autoregression study using the lag 2 basis show that there is a contribution from each variable to the variable itself and other variables. The results of the Vector Autoregression analysis also show that past variables (t-1) contribute to the current variable both to the variable itself and other variables. From the results of the analysis, there is a reciprocal relationship between one variable and another. Response Function analysis shows the response of other variables to changes in one variable in the short, medium and long term, and it is known that the stability of the response of all variables is formed in a period of 5 years or the medium and long term. Variance AnalysisDecomposition shows the existence of variables that have the largest contribution to the variable itself in the short, medium and long term such as Inflation and Labor. While other variables that have the greatest influence on the variable itself and are supported by other variables in the short, medium and long term are Investment and Unemployment which are most influenced by Inflation and Labor.