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ISSN : 2765-6934
Preventing Capital Flight to Reach Lucrative Investment In Indonesia
R. Dwi Harwin KUSMARYO (Polytechnic of Statistics STIS)
Sri Hartini RACHMAD (BPS-Statistics Indonesia)
Abstract
Purpose: This study aims to analyze the effect of macroeconomic and non-macroeconomic determinants of capital flight. Research design, data and methodology: With five determinants, this survey was conducted by Eviews 10, and the ordinary least squares (OLS) as a statistical method was applied for examining the research hypothesis. The five determinants are a budget deficit, economic growth, inflation rate, the exchange rate, and sovereign rating. The capital flight measurement uses the World Bank residual approach. The data derive from the Central Bank of Indonesia, BPS-Statistics Indonesia, OECD, and Moody‟s Investor Service. Results: The result considers that economic growth, the exchange rate, and the sovereign rating will decrease capital flight. In addition, the budget deficit and the inflation rate will increase capital flight. The sovereign rating decreases capital flight bigger than the other determinants. In addition, the exchange rate is statistically significant. Conclusions: The most influential problem of capital flight in Indonesia is because of non-macroeconomics factor political issue, corruption, bad regulation, and others. That‟s why the investment climate in Indonesia is still not secure. We propose that the regime would have to amend the business rule for reducing capital, raising the investment climate, and demonstrating the creative industry.
- keywords
- Investment, Capital Flight, Residual Approach, Non-Macroeconomic Determinant
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