Analysis Of Economic Growth Dynamics Through Generalized Method Of Moments

Stable economic growth is a challenge for Indonesia, especially in the face of social inequality and the risk of stagnation. This study analyzes the factors that influence economic growth in 34 Indonesian Provinces for the period 2014-2023 using the Arellano-Bond Generalized Method of Moments (GMM). The findings show that Foreign Direct Investment and per capita income have a positive effect on economic growth. In contrast, capital expenditure, expected years of schooling, and unemployment rate have a negative impact due to uneven allocation, low quality of education, and mismatch of job skills. Poverty has a positive impact, but risks stalling without appropriate policies. In addition, the lag of economic growth also affects economic growth itself. This study emphasizes the importance of policies that support equitable investment, optimize capital expenditure, and improve the quality of education to reduce unemployment and improve the competitiveness of the workforce. Poverty reduction programs need to be directed at creating economic opportunities. These findings form the basis for formulating strategies for equalizing investment, improving education, and creating employment opportunities.