The Impact of Government’s Foreign Debt on Fiscal Sustainability of Indonesia

• Main Author: Yohanes Maria Vianey Mudayen
• Format: Article
• Language: English
• Published: EconJournals 2017-09-01
• Series: International Journal of Economics and Financial Issues
• Subjects: government debt; economic growth; fiscal sustainability; the model simultaneously
• Online Access: https://dergipark.org.tr/tr/pub/ijefi/issue/32021/354323?publisher=http-www-cag-edu-tr-ilhan-ozturk

The aim of the research is to analyze the impact of government’s foreign debt on fiscal sustainability (FS) of Indonesia in 1979-2016. The model used in this research is a simultaneous equation model with the method of two stage least square. The simultaneous equation model regression results indicate that government foreign debt, FS which derives from the reduced-form equation and primary balance has a significant impact on the growth of economy in Indonesia positively. Government foreign debt lag and interest rate of Central Bank of Indonesia have a negative impact and it is significant toward the FS of Indonesia. However, the economic growth which comes from reduced form affect positively and have a significant impact on the FS of Indonesia.