Economic Growth Determinants of Asean Economic Community: Feasible Generalized Least Square Approach

¹ Department of Economics, Faculty of Economics and Business, Universitas Muhammadiyah Yogyakarta, Indonesia
² Sampoerna University, Jakarta, Indonesia

^* Corresponding author: imamudin@umy.ac.id

Abstract

This study aims to analyze the factors determining economic growth in ASEAN countries, which are the ASEAN economic community members as a potential center for world economic growth. The research method applied in this study was a panel data analysis model with a feasible generalized least square approach. The research period was from 2015 – 2019 in all ASEAN member countries: Indonesia, Myanmar, Malaysia, Singapore, Thailand, Laos, Vietnam, Cambodia, Brunei Darussalam, and the Philippines. Testing the data used the Chow and Hausman tests to determine the analysis method: fixed effect, random effect, or common effect. The results of panel data regression estimation with a feasible generalized least square approach uncovered that the variables of the number of the labor force, currency exchange rates, money supply (M1), exports, imports, Gini index, foreign debt, corruption perception index, financial literacy index, and foreign investment (PMA) significantly affected the economic growth of the ASEAN economic community, including develop agriculture sector. Meanwhile, the variables of domestic investment and financing credit did not affect the economic growth of the ASEAN economic community. The conclusion and recommendation from this study’s results are each ASEAN country’s efforts to encourage economic growth by utilizing its comparative advantages and strategic cooperation to create market opportunities and increase the economic efficiency of the ASEAN economic community.