Macroeconomic fundamentals and consumer confidence as drivers of Indonesia’s output growth: Evidence from 2020–2025
Keywords:
Indonesia, GDP growth, Inflation, Policy interest rate, Money supplyAbstract
This paper examines how key macroeconomic indicators and consumer sentiment relate to Indonesia’s output growth during the post‑pandemic period 2020–2025. Using secondary time‑series data on inflation, the policy interest rate, money supply growth (M2), trade dynamics (exports and imports), and the Consumer Confidence Index (CCI), we estimate a multivariate linear model to assess which indicators provide incremental explanatory power for growth. The baseline results indicate that consumer confidence is positively and statistically significantly associated with output growth (β = 0.198, p = 0.041), while inflation, the policy rate, M2 growth, exports, and imports are not statistically significant once considered jointly. The model’s explanatory power is modest (R² = 0.181), suggesting that additional drivers and nonlinear/dynamic effects likely matter for short‑run growth fluctuations. The findings underscore the practical value of sentiment indicators for monitoring the real economy alongside standard macro‑financial variables. However, results should be interpreted as conditional associations rather than causal effects; future research should incorporate time‑series diagnostics, dynamic specifications (e.g., ARDL/VAR), and a longer sample to address persistence, endogeneity, and structural breaks.
References
1. Akerlof, G. A., & Shiller, R. J. (2009). Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism. Princeton University Press.
2. Ascarya. (2012). Transmission channel and effectiveness of dual monetary policy in Indonesia. Bulletin of Monetary Economics and Banking, 14(3), 269–298. https://doi.org/10.21098/bemp.v14i3.405
3. Bank Indonesia. (2024). Consumer Expectation Survey: July 2024. Bank Indonesia. (Methodology section on the Consumer Confidence Index).
4. BPS‑Statistics Indonesia. (2025). Quarterly Gross Domestic Product of Indonesia 2021–2025. BPS‑Statistics Indonesia.
5. Carroll, C. D., Fuhrer, J. C., & Wilcox, D. W. (1994). Does consumer sentiment forecast household spending? If so, why? American Economic Review, 84(5), 1397–1408.
6. Guo, Y., & He, S. (2020). Does confidence matter for economic growth? An analysis from the perspective of policy effectiveness. International Review of Economics & Finance, 69, 1–19. https://doi.org/10.1016/j.iref.2020.04.012
7. Handayani, F. A., & Kacaribu, F. N. (2021). Asymmetric transmission of monetary policy to interest rates: Empirical evidence from Indonesia. Bulletin of Monetary Economics and Banking, 24(1), 119–150. https://doi.org/10.21098/bemp.v24i1.1201
8. Newey, W. K., & West, K. D. (1987). A simple, positive semi-definite, heteroskedasticity and autocorrelation consistent covariance matrix. Econometrica, 55(3), 703–708.
9. Nguyen, M.-L. T., & Bui, T. N. (2021). Trade openness and economic growth: A study on ASEAN‑6. Economies, 9(3), 113. https://doi.org/10.3390/economies9030113
10. OECD. (n.d.). Consumer confidence index (CCI). OECD Data/Indicators. (Accessed 2026‑03‑02).
11. Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289–326.
12. Sims, C. A. (1980). Macroeconomics and reality. Econometrica, 48(1), 1–48.
Downloads
Published
Conference Proceedings Volume
Section
License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.