Open AccessFinancial Market Development on Economic Growth in Indonesia Using Principal Component Regression Analysis
Author(s) -
Mohd Yusri Bin Mohd Yunus,
Budi Setiawan,
Priya Rani Bhagat,
Adil Saleem
Publication year - 2022
Publication title -
jurnal akuntansi dan keuangan /jurnal akuntansi dan keuangan
Language(s) - English
Resource type - Journals
eISSN - 2716-022X
pISSN - 2301-4717
DOI - 10.29103/jak.v10i1.6525
Subject(s) - principal component analysis , indonesian , regression analysis , stock market , economics , econometrics , linear regression , variables , unemployment , macroeconomics , statistics , mathematics , geography , context (archaeology) , archaeology , philosophy , linguistics
This study investigates the relationship between macroeconomic variables and financial market development on economic growth in Indonesia using principal component analysis. A quantitative data was collected from World Bank dataset from 2002 to 2019. Data were analysed using statistical software R. Findings reveal principal component analysis is better than multiple linear regression in explaining the correlation among independent and dependent variables. This study also reveals stock traded of total value as percentage of GDP has the biggest effect on the performance on Indonesian economy during research period. In contrast, unemployment has the smallest impact on economic growth in Indonesia. The results assist in understanding the importance of macroeconomic variables and financial market development on the performance of Indonesian economy.