The Impact of Fiscal Policy on Indonesian Economy: An Application of Computable General Equilibrium (CGE) Approach
The primary purpose of this study is to evaluate the impact of fiscal policy on the Indonesian economy. This study is designed using quantitative analysis by utilising a secondary data, which collected from the central bureau of statistics of Indonesia, namely Social Economic Balance System (SNSE) and National Socio-Economic Survey (SUSENAS) in 2008. This study considers the several variables for measuring the Indonesian economy, such as economic growth, inflation rate, labour absorption sector, income levels and income distribution of the household group. Also, there are three variables simulated as a shock to the developed model. The data is analysed using the Computable General Equilibrium (CGE) model by assisting the analytical software, i.e. GAMS 23.5. The results of the simulation analysis showed that the fiscal policy has a significant impact on economic growth and inflation rate. The labour absorption has achieved when the highest increase in the livestock, land transportation, hospitality and other services sector. Also, these three mix policies have impacted on household group’s income. The household income distribution does not increase significantly among the low-income household.