Published date: Oct 15 2024

Journal Title: KnE Social Sciences

Issue title: 8th International Conference on Sustainability (8th ICoS): Sustainable Economics

Pages: 546–561

DOI: 10.18502/kss.v9i29.17281

Yahya Nusayahya.nusa@gmail.comUniversity of Merdeka Malang, Malang, Indonesia

Anwar SanusiUniversity of Merdeka Malang, Malang, Indonesia

Fajar SupantoUniversity of Merdeka Malang, Malang, Indonesia

Savitri .University of Merdeka Malang, Malang, Indonesia

Suryaning BawonoUniversity of Merdeka Malang, Malang, Indonesia

The difference in the results from previous studies on the impact of inflation on poverty, coupled with an increase in the money supply from direct investment, inspired this research. This study aimed to ascertain how poverty, inflation, and foreign investment affect consumption spending in Indonesia based on 1997-2021 time series data. This study used Vector Autoregression estimation, utilizing data sources from the World Bank. The data will be processed with econometric models. From the study’s findings, it may be inferred that overall consumption affects inflation, which can be seen from the Granger causality test that shows that this variable has a one-way causal relationship. The results of the same test also show that FDI has an effect on total consumption and conversely consumption has an effect on FDI. However, the poverty variable does not affect total consumption and vice versa, because according to the causality test, the variable obtains an insignificant probability value. However, the VECM results explain that poverty has an effect on total consumption, and that the effect of consumption on inflation is due to the larger t-statistic value and has a positive relationship. This implies that the rate of inflation will increase the lower the level of consumption. However, the Impulse Reason test shows that poverty has a negative trend, as does the FDI variable.

Keywords: poverty, inflation, FDI, consumption, economic growth, Indonesia

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