DYNAMIC EFFECTS OF INTERACTION BETWEEN ECONOMIC GROWTH, INVESTMENT AND SAVINGS WITH INTERNATIONAL TRADE IN INDONESIA

Anticipation of economic uncertainty needs to be done to avoid the brink of crisis by maintaining the pace of economic growth, investment and savings climate as well as smooth international trade. This study aims to analyze and explore the dynamic relationship interaction between economic growth variables projected as Gross Domestic Product (GDP), investment, gross domestic savings and international trade of the Indonesian state with data in the period 1971-2020 obtained from the worldbank.org website. The research method uses the Vector Auto Regression (VAR) analysis model with the development of Impulse Response Function (IRF) and Variance Decomposition (VDC) analysis to explain the response of a variable to the shock of the variable itself and other variables. The results of the analysis revealed that the one-way relationship for the variables of investing, saving, and trading was influenced by the variable itself with a lag of one. In addition, the results of IRF analysis show that the variable response of economic growth, investment, savings and international trade is dominated by shocks to economic growth variables, and the results of VDC analysis show that economic growth variables most contribute to the variable response of economic growth itself, investment, savings and international trade. The results of this study can be used as a reference for the formulation of anticipatory policies by the government and Bank Indonesia in preventing the risk of economic crisis by maintaining macroeconomic variable stability so that the level of domestic market confidence is maintained in the outlook. Therefore, the policy stages that can be carried out are to control inflation, reduce the current account deficit, maintain fiscal balance and improve in managing foreign debt.


THE INTRODUCTION
Global uncertainty triggered by various issues such as the financial crisis, the Covid-19 pandemic to the Russia-Ukraine war which caused soaring commodity and energy prices had an impact on Indonesia's macroeconomic performance.Economic growth is a macroeconomic variable that is the main and crucial highlight in assessing economic performance as well as the focus of a country's government policy (Makuria, 2015;Rahman et al., 2020;Sekine, 2022).This is because economic growth is one of the indicators in assessing and evaluating economic development conditions (Yuni, 2021).In addition, economic growth is also a benchmark for developing country governments in formulating policies to improve the status of developed countries (Tan & Tang, 2016).Existence Indonesia's economic growth as a country that is trying to improve its status to become a developed country is still very volatile and vulnerable to global crises as shown in Figure 1.The economic crisis has been in several periods, including the darkest occurred in 1997-1999 known as the monetary crisis that infected almost all countries in the world where economic growth was minus to above 15 percent.In general, the performance of economic growth is caused by various influencing factors where these factors are also strongly influenced by the performance of economic growth, meaning that there is a causality relationship between these variables.One of them is investment which has an important role in supporting economic growth (Dankyi et al., 2022).Furthermore, stable economic growth reflects an automatic increase in people's income as well as increased demand in the market which encourages companies to expand through investment (Sukirno, 2000).
Investment comes from capital participation made by the government and private sector where the capital comes from domestic and foreign savings.
From the domestic side, savings are influenced by economic growth which is a picture of people's income.Keynes's (1936) model revealed that increasing people's income has implications for increasing the availability of funds that are not used for consumption or has implications for increasing investment (Jhingan, 2016).However, there are various investment problems in Indonesia that are classic in nature, namely bureaucratic system problems that have not shown good performance such as permits, land disputes and regulatory uncertainty.
Furthermore, Solow's model (1970) explains, the savings rate plays an important role in the capital stock for investment which will produce a high output rate and it can happen the other way around which means there is a causality relationship between the savings rate and economic growth (Hasan & Fitra, 2013).The savings rate in Indonesia is currently still constrained by low income growth due to high levels of poverty and unemployment as well as lack of jobs due to the crisis caused by Covid-19.To overcome this, international economic openness, which can be described based on trade volume, has an important role in increasing investment and savings (Eslamloueyan & Jafari, 2010) .Furthermore, international trade will have an impact on sustainable economic growth in the long run (Shahbaz, 2012).However, for Indonesia, the issue of international trade is still a major challenge that must be passed due to various problems faced today such as global uncertainty due to the lack of conducive political situations between countries in the world such as the Ukraine-Russia war which began at the beginning of 2022, still high dependence on imports, and the low quality of human resources.
So in general, based on the identification that has been explained, there is a flow of causality relationship between economic growth and the level of savings as a source of investment and international trade which is the determinant of economic growth.In addition, one of the investment levels is determined by the availability of funds sourced from the level of public savings, economic growth and gains from international trade.The availability of savings is also influenced by economic growth, thereby increasing the amount of funds that are not consumed by the public and also positively influenced by the growth of investment and international trade.In the end, the existence of Indonesia's international trade can be encouraged due to the stability of economic growth, a good investment climate and the availability of adequate savings as a source of funding.
So based on the identification of problems in this study, also variable analysis focuses on variables of economic growth, savings rates, investment and international trade.Some considerations focus on variables, including based on literature reviews that have been carried out, there is still controversy about the relationship between economic growth and investment, savings and international trade where there is insufficient empirical evidence about the specific nature of the relationship between these variables.In addition, these variables also have relationships that influence each other so it is important to analyze causally, and the response and proportion of changes in a variable to changes (shock) other variables.
The novelty in this study compared to previous studies lies in the selection of variables that have not previously been analyzed at once in causality analysis, analysis of the response of a variable to the shock of other variables in the long run and the proportion of changes in a variable as a result of the shock of the variable compared to shocks of other variables.Therefore, this study aims to analyze the causality relationship and dynamic effects between economic growth, investment, savings and trade in Indonesia with a more in-depth study than previous studies because this study involves a longer historical period  which aims to produce in-depth information related to shock and response variables in this study.

LITERATURE REVIEW
The interaction between economic growth and investment, savings and trade The paradigm of economic growth according to Solow's theory focuses on changes in factors of production, including capital in the sense of savings-investment and labor.In addition, the Harrod-Domar model also states that savings and investment are sources of economic growth.The difference between the two models lies in the marginal rate of return where Solow's model assumes that the marginal rate of return is declining but the Harrod-Domar model assumes that the marginal rate of return is constant (Yustika, 2012).In addition, to support the existence of economic growth is maintained with additional investment and savings, opening the tap of interaction with the international world on the trade side is a positive thing for increasing income.
Countries with open economies will benefit from trade in terms of technology knowledge transfer (Barro & Salai-i-Martin, 1995).In addition, international trade increases competition between domestic and international markets so that it will naturally explore the potential that will increase economies of scale as well as specialization and ultimately expand market size (Melitz & Ottaviano, 2008).

Causality Relationship between Investment and Economic Growth
Several empirical studies prove that investment has a causality relationship, including studies (Nupehewa et al., 2022 ;Tan & Tang, 2011;Tan & Tang, 2016;Fatiha & Masih, 2017) stated that investment, especially in foreign direct investment, affects economic growth through the transfer of technological knowledge from foreign countries so that production methods become more effective and efficient, especially in the manufacturing sector industry as well as the existence of manpower training, skill acquisition and better management patterns.Furthermore, economic growth can also affect the increase in investment through investor confidence in guaranteed future returns.(Tan & Tang, 2011;Tan & Tang, 2016;Fatiha & Masih, 2017).On the other hand, several studies confirm that there is no causality between investment and economic growthi (Mehanna, 2011;Jangili, 2011;Bakari, 2018;Suhel, 2008;Saimul & Darmawan, 2020;Juliansyah et al., 2022)

Causality Relationship between Savings and Economic Growth
Savings and economic growth have a causal relationship where the savings rate describes the availability of capital that can be invested so that it will affect economic growth.Conversely, stable economic growth will have an impact on increasing income from international trade and foreign investment, so that economic growth will also increase domestic savings.This is also evidenced by several empirical studies (Saltz, 199;Andersson, 1999;AbuAl-Foul, 2010); Zhang et al., 2017).However, some empirical evidence suggests that there is no causality between the rate of savings and economic growth as expressed (Zangeneh, 2006;Tang, 2010;Makuria, 2015;Karahan, 2018); (Đidelija, 2021).

Causality Relationship between International Trade and Economic Growth
Previous studies revealed that international trade and economic growth have a causal impact where trade has an impact on increasing income derived from exports and imports that are carried out to present new technology so that the transfer of technological knowledge occurs which in the end the production process carried out can be more efficient.In addition, the economic growth rate will increase trade due to additional domestic income.

Causality Relationship between Savings and Investment
Savings and investment have a causality relationship where the savings rate is a reflection of the availability of capital that can be invested, besides that the investment level will increase income in the future so that high income is a determinant of the amount of savings.This has been proven through several studies including: (Chakrabarti, 2006;Irandoust, 2019).Other results confirm the opposite result, there is no causality relationship between savings and investment (Jangili, 2011;Nguena, 2011;Otoo et al., 2020)

Causality Relationship between Savings and International Trade
Several empirical studies prove that saving and trading indirectly, especially through income and capital levels, have a causality relationship.The results of international trade have an impact on increasing income which further increases the availability of funds saved.The savings rate will determine the availability of capital used as an instrument to support trade.This result has been proven through several studies among othersa (Liu, 2009;Gries & Redlin, 2020).

Causality Relationship between Investment and International Trade
Previous empirical studies have revealed that investment and international trade have a causality, albeit indirect, relationship with which the level of investment affects trade through increased revenue.This is based on the findings (Bajo-Rubio, 2001;Dritsaki et al., 2004;Akadiri et al., 2020;Rani & Kumar, 2019).However, case studies in Indonesia did not find a causality relationship between investment and international trade (Herdianto, 2021).

METHODOLOGY
Time series data analysis techniques with a Vector Auto Regression (VAR) approach were used in this study with the aim of producing empirical evidence of a picture of causality and dynamic relationships between the variables tested (Kurniawan, 2019).The variables in this study are economic growth projected as Gross Domestic Product (GDP) per capita, investment, gross domestic savings and international trade of the Indonesian state with data in the period 1971-2020 obtained from the https://data.worldbank.org/website.The variable GDP per capita is defined as the sum of gross value added by all resident producers in the economy plus product taxes (minus subsidies) that are not included in the assessment of output, divided by the population in one year.In addition, the Investment Variables in this study use foreign direct investment data which is the net inflow of investment in the reporting economy from foreign investors, and divided by GDP.Furthermore, gross savings are calculated as gross national income minus total consumption, plus net transfers.Lastly, International Trade is the amount of exports and imports of goods and services measured as a share of gross domestic product (data.worldbank.org:2023).
Based on several variables that have been described, the VAR equation compiled in this study using lag 1 based on the results of optimum lag testing is as follows: There are several stages in using VAR analysis, namely first testing data stationarity as the main requirement before estimating using the VAR model where data stationarity can be seen if the data moves convergently in the area of mean values with small deviations and there are no positive or negative trends.Stationarity testing using the ADF test method and a reference probability level of five percent.If the ADF probability value is smaller than the value of 0.05, it can be concluded that the data used is stationary or does not contain unit roots.After that, determination of lag length needs to be done to produce residuals that are free from autocorrelation and heterokedasticity (Wardhono, 2019).Determination of optimal lag length using available information criteria according to Likehood Ratio (LR), Final Prediction Error (FPE), Akaike Information Crition (AIC), Schwarz Information Crition (SC), and Hannan-Quin Crition (HQ) criteria.Furthermore, VAR stability tests are carried out so that the VAR model obtained can be assumed to be stable so that the results of Impulse Response Function (IRF) and Forecast Error Variance Decomposition (FEVD) analysis are also considered valid.After that, the Granger causality test can be carried out which is used to identify a two-way relationship or causality between two variables.The last stage is Impulse Response Function (IRF) analysis and Forecast Error Variance Decomposition (FEVD) analysis where IRF is an analysis used to identify the response of an endogenous variable to a particular shock and FEVD analysis to identify fluctuations in a variable by looking at changes in error variance influenced by other variables (Firdaus, 2019).

RESULT AND DISCUSSION
The general picture of Indonesia's economic growth, investment, savings and trade performance from 1971-2020 is very volatile as described in Domestically, the vulnerability of national economic resilience can be caused by various things including high disparities between regions, low quality of human resources due to poor education management, high unemployment and poverty rates due to limited employment, inflation that is still uncontrolled and dependence on domestic production on foreign countries trigger the hampering of the domestic economy if partner countries trade experiences a crisis or trade deregulation by partner countries.These domestic problems are ultimately integrated with the increasing dependence of the national economy on foreign countries so that economic uncertainty to the global crisis will greatly impact the domestic economy.
The estimation results obtained from the VAR model of variables of economic growth, investment, savings and international trade explain several things.First, Table 1 describes the results of stationary testing using the ADF test method and the reference probability level of five percent.If the ADF probability value is smaller than the value of 0.05, it can be concluded that the data used is stationary or does not contain unit roots.The results show that all variables are stationary at the first level (at-level) where all variables have an ADF probability value smaller than the value of 0.05.Second, the results of determining the optimal lag length using LR, FPE, AIC, SC, and HQ.The determination of optimal lag in this study based on the criteria of sequential modified LR statistical test (LR) obtained optimal lag at lag 1 as described in Table 2 below.

Table 2. Optimal Lag Test Results
Source: Data Analyzed Third, based on the results of stability testing the estimation of the VAR equation system in Table 3 which has been formed through roots of characteristic polynomials to all variables multiplied by the number of lags, the VAR system produced in this study is stable because it shows that all roots have modulus values smaller than one.This means that the results of IRF and FEVD analysis that will be produced later can be said to be valid.Next, analysis of Impulse Response Function (IRF) analysis which visually explains the response to a variable due to the shock of another variable.The results of the IRF analysis described based on Figure 1 with plots from IRF as many as 20 plots / year in the future explain visually the response of variables of economic growth, investment, savings and trade arising from the shock of the variables themselves and another variable mentioned.So the results of the IRF analysis in this study are as follows: -  First, based on Table 7 the response of economic growth over the next 20 years due to shocks from investment, savings and trade variables shows a small but increasing percentage with the proportion of savings being the variable most responded to by economic growth.That is, the availability of domestic savings is a very important factor where savings are a source of availability of funds that can be used as capital channeled to industries so as to increase productivity and job expansion which has an impact on economic growth.
Second, based on Table 7 investment responses over the next 20 years due to shocks from economic growth variables, savings and trade show an increasing percentage with the proportion of economic growth being the variable most responded to by investment where the increase in investment responses due to shocks from economic growth increased sharply in the first five years but declined slowly over the next 15 years.Even so, the level of investment is largely determined by economic growth as the main factor in attracting investors both domestically and internationally to invest in Indonesia which will then open new jobs so as to reduce poverty rates and ultimately will have an impact on economic growth.
Third, based on Table 7 the response of savings over the next 20 years due to shocks from variable economic growth, investment and trade shows mixed percentages where the shock from economic growth increased sharply in the first five years but declined slowly over the next 15 years.Meanwhile, the amount of savings response due to investment shock has continued to decline for 20 years.In contrast, the size of the savings response resulting from the shock from trade has been increasing for 20 years.This indicates that the results of trading are the main factor that brings in unconsumed income aka savings.
Fourth, based on Table 7 trade responses over the next 20 years due to shocks from variable economic growth, investment and savings show mixed percentages where shocks from economic growth are the most responded to by trade levels but continue to decline slowly over the next 20 years.The shock trade response from investment and savings rates fluctuated over the next 20 years.This result shows that economic growth is the factor that most contributes to Indonesia's trade performance.

CONCLUSIONS
Anomaly in economic performance has an impact on uncertainty in Indonesia's economic condition where it is proven that historically the global economic phenomenon has greatly affected domestic economic performance such as economic growth, investment, savings and trade.This study uses a Vector Auto Regression (VAR) analysis model to analyze interactions and explore dynamic relationships between variables of economic growth, investment, savings and trade.The findings begin with all assumptions that have been passed in using the VAR model where the variable is stationary at the level (at Level) with an optimal lag of one and the analyzed VAR model is stable expressed by the value of the modulus, so that the analysis of Impulse Response Function (IRF) and Variance Decomposition (VD) is valid.Granger's causality results show that there is no causality relationship between the analyzed variables where there is only a one-way relationship for investment, savings, and trading variables that are influenced by the variable itself with a lag of one.In addition, the results of the IRF analysis showed economic growth shocks to be the most responded by other variables, as well as the results of the VD analysis of economic growth that contributed the most to the responses of other variables.The results of the study can be a reference to formulate anticipatory policies in preventing the risk of economic crisis by maintaining the stability and conduciveness of the variables that have been analyzed.In addition, further research is expected to add or find other variables that are more relevant in the study of causality relationships.Crosscountry studies are also interesting to do because the interrelationships between economies globally are increasingly dependent on each other.

Figure 1 .
Figure 1.Economic Growth in 1975-2020 (Percent) (Source : worldbank.org,2020.) After that in 2008, the Indonesian economy was affected by the global financial crisis which had an effect in 2009 economic growth only touched 4.63 percent, down compared to the previous year of 6.01 percent.Then in 2020 the crisis due to Covid-19 caused Indonesia's economic growth to contract by 2.19 percent.In terms of movement, Indonesia's economic growth throughout the period 1975 to 2020 moved very fluctuating, which indicates the vulnerability of the Year Indonesian economy by global factors.

Figure 2 .(
Figure 2.This picture proves that the Indonesian economy is very vulnerable to crisis risks influenced by various factors both domestic and global.

Table 4 . Granger Causality Test Results
Source: Data Analyzed