Crowding Out and Multiplier Effect in Indonesia

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DOI: https://doi.org/10.28924/2291-8639-23-2025-126
Published: May 26, 2025
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Rubianto Pitoyo, Zefriyenni, Afriany, Crowding Out and Multiplier Effect in Indonesia, Int. J. Anal. Appl., 23 (2025), 126.

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Rubianto Pitoyo, Zefriyenni, Afriany

Abstract

The purpose of government policy from the issuance of SUN, which is anticipated to increase the amount of APBN funding available from the capital market, is affecting private investment and macroeconomic conditions. This research aims to find the correlation between SUN issuance, private bonds, Gross Domestic Product, inflation, and interest rates and finding out whether there is a multiplier effect in short term due crowding-out conditions in Indonesia. Canonical correlation is used to forecast and analyze correlations between sets of dependent and independent variables within a group. The degree of relationship between two sets of variables is measured by the canonical correlation, which characterizes an ideal linear combination of dependent and independent variables The government policy for issuing bonds (SUN) may alter the change with 48.437 percent on dependent variables (Gross Domestic Product, inflation, interest rates, and Indonesian Composite Index), and vice versa, changes in independent variables will also have an effect on changes with 38,666 percent in independent variables (Stocks, Government Bonds, And Corporate Bonds). The crowding out effect doesn’t produce the expected increase in the economic scale greater than one as predicted by Keynesian theory; however, Indonesia's crowding-out situation has a positive multiplier effect, leading to increases in Gross Domestic Product, Inflation and the Indonesian Composite Index.

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