Digitalization and Economic Growth in Indonesia: Insights from Short and Long-Run Perspective

¹ Faculty of Economic and Business, Bangka Belitung University, 33172 Bangka Belitung, Indonesia
² School of Public Policy and Management, Tsinghua University, 100084 Beijing, China

^* Corresponding author: tomisah33@gmail.com

Abstract

Information and communication technology (ICT) play a pivotal role in driving economic growth and development in current digital era. By analyzing data spanning from 1994 to 2022, this study investigates the relationship between digitalization indicators, including internet users, mobile cellular subscriptions, foreign direct investment (FDI), and population growth on economic growth in Indonesia. The findings reveal nuanced dynamics, with a contrasting effect observed in the long and short run for each variable. In the long run, internet users, FDI, and population growth demonstrate positive impacts on economic growth, reflecting their role in fostering productivity, innovation, market expansion, and resource allocation. Conversely, mobile cellular subscriptions exhibit negative effects on economic growth. In the short run, all variables exhibit negative effect on economic growth, where temporary fluctuations in economic performance are observed in response to changes in digitalization indicators, emphasizing the importance of considering both short-term disruptions and long-term trends in economic analysis. The study highlights the complex interplay between digitalization and economic growth, offering insights for policymakers, businesses, and researchers seeking to navigate the digital economy landscape in Indonesia.