The results above are consistent with past studies. Consider for
example, Erahman et al. (2016) who posited that the prosperity
in the economy in Indonesian economy shows dependence on its
energy sector because this country has rich natural resources as
compared to other countries in Asia. The relationship between
prosperity in the economy and utilization of energy sources was
reflected by unidirectional causality between with income and
utilization of energy sources as indicators. Furthermore, it was
also shown that with increase in the trade openness in Indonesia
the efficiency of its exports of energy resources also showed
improvement with a positive impact on the GDP of the economy.
These results were matching those provided in Bakirtas and
Akpolat (2018).
Considering the broader prospective of developing countries and
not specifically Indonesia Farabi et al. (2019) showed that the
developing countries with rich energy resources show positive
prosperity in the economy with high pace as they increase their
exports of oil and gas across the globe. However, there are also
studies that show mixed results in terms of relationship between
utilization of energy sources and prosperity in the economy. For
instance, although there was a positive impact of utilization of
energy sources on prosperity in the economy in short run, in the
long run the results showed that there were different obstacles
facing prosperity in the economy of Indonesia.
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International Journal of Energy Economics and Policy | Vol 10 • Issue 5 • 2020 631
International Journal of Energy Economics and
Policy
ISSN: 2146-4553
available at http: www.econjournals.com
International Journal of Energy Economics and Policy, 2020, 10(5), 631-637.
Utilization of Energy Sources, Financial Stability and Prosperity
in the Economy of Indonesia
Hoang Thanh Hanh1, Dinh Tran Ngoc Huy2*, Pham Minh Dat3
1Academy of Finance, Vietnam, 2Banking University HCM City Vietnam, and International University of Japan, Japan, 3Thuongmai
University, Ha Noi, Vietnam. *Email: dtnhuy2010@gmail.com
Received: 08 May 2020 Accepted: 26 July 2020 DOI: https://doi.org/10.32479/ijeep.10242
ABSTRACT
The aim of this study was to explore the relationship between utilization of energy sources, financial stability and prosperity in the economy of
Indonesia. For this purpose this study conducted panel data analysis and gathered data from 1990 to 2018. The study explored the relationship of CO2
emissions and utilization of energy sources per capita as indicators of utilization of energy sources. The indicators for financial stability were real
domestic credit to the private sector where the financial information of different financial institutions operating in Indonesia has been collected. The
prosperity in the economy indicator for Indonesia was gross domestic product per capita and also the labour force that works within different sectors
operating in the country. Using descriptive statistics, Unit root analysis, and the autoregressive distributed lag techniques, a panel data analysis was
conducted. The results of showed that there is long term relationship between utilization of energy sources, financial stability and prosperity in the
economy indictors of Indonesia.
Keywords: Financial Stability, Utilization of Energy Sources, Gross Domestic Product, Autoregressive Distributed Lag
JEL Classifications: B26, O13
1. INTRODUCTION
The international trend highlights that effective utilization of
energy sources leads towards the attainment of the prosperity in the
economy within various developing states. The study conducted
by Yang and Wang (2018) states that Indonesia is one of those
developing countries that focus on the rise of apprehension over
increasing the utilization of energy sources in terms of the method
of low emission of CO2 and green growth. Since the independence
of Indonesia, the prosperity in the economy of the country has
faced various issues in terms of depending upon its exports and
also within the energy sector of the country. Based on the study
conducted by Hasnisah et al. (2019), Indonesia is one of those
countries being rich into natural resources including minerals,
coals, oil and gas and also in agricultural products. It has been
found in the study conducted by Alam et al. (2016), the energy
sector has a dominant contribution in the growth of the GDP based
on both supply and demand sides. When it comes to Indonesia,
development in the sector of energy is one of the most significant
factors of manufacturing specifically on the supply side. Besides
the prosperity in the economy of Indonesia, energy also plays its
key role within increasing the living standards of its citizens and
also to enhance the capital, labour and materials of the country
(Hasnisah et al., 2019).
The study of Bashir et al. (2019) asserted that consumption of
energy impacts significantly on the growth of the Indonesian
economy in terms of having a causal relationship between these
factors. The view of utilization of energy sources depends on
the consumption patterns within the country where energy-rich
countries and energy-poor countries both rely on the utilization of
energy sources and energy conservation policies developed by their
assigned authorities (Sasana and Aminata, 2019). Various studies
identified significant relationships between utilization of sources of
This Journal is licensed under a Creative Commons Attribution 4.0 International License
Hanh, et al.: Utilization of Energy Sources, Financial Stability and Prosperity in the Economy of Indonesia
International Journal of Energy Economics and Policy | Vol 10 • Issue 5 • 2020632
energy and the fostering economy where the causality runs from
the utilization of energy sources to GDP, it shows that the economy
is highly dependent on energy (Widyaparaga et al., 2017). Thus,
it takes to a certain thought that energy is a stimulus towards the
prosperity in the economy (Nawaz e al., 2019). In the light of the
study of Kurniawan and Managi (2018), shortage of energy and
less utilization of energy sources indicate that there might be an
insignificant effect on the enhancement of the economy of a country.
Secondly, if the causality runs from the GDP to the utilization of
energy sources, it shows that the prosperity in the economy is not
dependent on the utilization of energy sources and the country is
energy independent (Widyaparaga et al., 2017). When it comes
to the fostering of the financial units, the relationship between
prosperity in the financial aspects and fostering of the GDP is also
considered to be highly significant that primarily depends on the
effectiveness and growth of the financial sectors operating in the
country. According to the study conducted by Hasan (2018), in
Indonesia, financial institutions and the openness of the country
towards international trading play a significant role in boosting
the economy towards growth. However, there are various studies
that argue on the higher effect of fostering of financial strength on
the GDP increase of Indonesia as some studies consider it to be
the primary factor and some studies consider it to be a secondary
factor for making an economy grow rapidly.
The economy of Indonesia has had a history of suffering from the
economic downfall specifically due to the Asian Financial Crisis
that impacted its economy in a negative manner (Ghosh et al.,
2017). Moreover, lack of the effective utilization of its resources
and its resistance towards the openness in trade also had a negative
impact on its economy as the financial institutions had not been
capable enough to attain sustainable growth. In the economic
perspective, the linkage within the financial fostering and the
stability of the economy is divided into two distinct categories that
include supply-leading effect on the economy, demand-following
fostering of the economy (Sari et al., 2018). Nasreen et al. (2017)
found that financial stability improves environmental quality;
while the increase in economic growth, energy consumption and
population density are detrimental for environment quality in the
long-run for South Asian countries. The results also support the
environmental Kuznets curve (EKC) hypothesis which assumes
an inverted U-shaped path between income and environmental
quality. The study conducted by Dewi et al. (2018) explained
these categories stating that supply leading is related to the
financial stability leading towards the prosperity in the economy
and demand following is related to the prosperity in the economy
leading towards the financial stability. However, the argument still
remains within various studies in terms of the effect of stability
in terms of financial aspects that lead towards the stability of the
economy (Ghosh et al., 2017). Despite all this, it becomes evident
that the prosperity in the economy requires the effectiveness within
the financial institutions that lead towards financial stability.
2. LITERATURE REVIEW
There have been various studies conducted related to the
connection between the consumption of energy and the fostering
in the economic conditions and also the stability based on the
financial aspects leading towards the progress of a nation. In
accordance with the study conducted by Erahman et al. (2016), the
prosperity in the economy of Indonesia is dependent on the energy
sector as it is one of the countries that are rich in natural resources
specifically in Asia. This study shows the unidirectional link
within fostering of the economy and stability in financial aspects
in Indonesia. As the trade openness in Indonesia has increased,
the country has become more efficient in terms of exporting its
energy resources that have been impacting its GDP in a positive
manner (Bakirtas and Akpolat, 2018). According to the study
conducted by Farabi et al. (2019), developing countries that are
rich in energy resources, their economies are boosting rapidly
in terms of the increased demand of oil and gas globally. When
it comes to the consumption of energy, there are various studies
such as Bakhtyar et al. (2017) that have shown mixed results in
terms of the effect of utilizing energy on fostering the economy
and making it stable. The use of energy within the prosperity in
the economy as it could lead towards the short term prosperity in
the economy but can bring various hindrances in the long term
growth of the Indonesian economy.
H1: Utilization of energy sources has a significant impact on the
prosperity in the economy of Indonesia.
The study conducted by Nugraha and Osman (2019) states that
the effective governmental policies regarding the consumption of
energy are highly essential in terms of attaining prosperity in the
economy that also depends on the efficient allocation of resources.
This study focuses on that the government of Indonesia should
discourage energy reduction policies and various new sources
of energy must be discovered in order to boost prosperity in the
economy. The study conducted by Kristjanpoller et al. (2018)
states that the rise in the prosperity in the economy leads towards
the demand of energy within the country in terms of exports and
also in terms of consumption. However, there has been a debate
on utilization of energy sources in different studies in terms of the
types of energy that are renewable and non-renewable energies.
It has been found in the study conducted by Isik et al. (2018)
that renewable energy can lead towards a long term prosperity in
the economy and non-renewable energy sources cannot lead the
Indonesian economy towards fostering the economy for a long
period of time. The reason behind this is the consumption patterns
of the non-renewable energy sources in the country as these energy
sources might end after a certain period of time and its ineffective
usage. Moreover, a unidirectional strong relationship between
the utilization of energy sources leading towards stability in the
economy of the developing countries where the government is
focused on making price ceiling policies in order to facilitate the
economy towards sustainable growth.
H2: Prosperity in the economy of Indonesia is highly dependent
on the non-renewable energy sources.
When it comes to the stability in financial aspects and prosperity in
economy of Indonesia, the relationship between financial stability
and prosperity in the economy implies positive impacts on the
growth of the GDP of Indonesia. According to the study conducted
by Durusu-Ciftci et al. (2017), there is a long-term impact of the
financial stability and prosperity in the economy of Indonesia as it
is dependent on the capabilities of financial institutions operating
Hanh, et al.: Utilization of Energy Sources, Financial Stability and Prosperity in the Economy of Indonesia
International Journal of Energy Economics and Policy | Vol 10 • Issue 5 • 2020 633
within the country. On the other hand, the study conducted by
Aginta et al. (2018) found the causality from the financial stability
to the prosperity in the economy where there is a co-integration
between financial stability and prosperity in the economy in
Indonesia. The role of financial institutions operating in Indonesia
is also dependent on the openness within the international trade
of the country internationally that increases the effectiveness of
these financial institutions within these countries leading towards
the prosperity in the economy of Indonesia. According to the study
conducted by Lenee and Oki (2017), the link on the domestic credit
to the private sector and the economic stability is significant than
the broad money and prosperity in the economy. Indonesia is one
of those countries that have been impacted negatively specifically
after the Asian Financial Crisis in terms of the downfall of its
economy. Moreover, the lack of effective allocation of resources
and lack of skilled human capital has also had an impact on its
prosperity in the economy. In the light of the study conducted by
Saud et al. (2019), market capitalization also plays a vital role in
the financial stability in Indonesia that could lead the Indonesian
economy towards rapid growth. This particular study has found
the bi-directional causality between the prosperity in the economy
and the capital market where the market capitalization ratio, broad
money and the financial rate system drive the stability of the
economic aspects for the country.
H3: Financial stability boosts the prosperity in the economy
significantly in Indonesia.
There has also been a huge argument in previous studies conducted
on the financial capabilities and the stability in the economy
of Malaysia that led into two different concepts regarding the
prosperity in the economy and the financial stability. The first
concept built was based on the prosperity in the economy driving
towards financial stability and the second concept was based on
the financial stability driving the prosperity in the economy in
Indonesia. However, the debate still remains within the available
literature that requires the need of conducting a specific study on
the Indonesian capital market for assessing the effect of financial
growth on the growth of the Indonesian economy (Ajija and
Rizal, 2019). Therefore, it would be evident that financial stability
has a drastic significant impact on the economy of Indonesia.
Moreover, when the utilization of energy sources and financial
stability are concerned in terms of having an integrated impact on
the Indonesian economy, previous studies highlight both of these
aspects to be essential for the prosperity in the economy of the
country. However, the need is to make utilization of energy sources
and conservation policies effective and also to make financial
institutions work effectively based on the openness within the
trade of the country globally.
H4: Effectiveness of financial institutions are highly significant
for the prosperity in the economy of Indonesia.
3. DATA AND METHOD
3.1. Unit Root Test
The main objective of the study was to evaluate the association
between the utilization of energy sources, financial stability
and prosperity in the economy of Indonesia. The source of data
reflects on the collection of secondary data which are from Federal
Reserve economic data, World Bank and trading economies. The
variables identified for reflecting the energy sources, financial
stability and prosperity are the labour forces, energy consumption,
CO2 emission and real domestic credit to the private sector. With
respect to the economic growth, it is measured by the GDP per
capita of Indonesia. The time period on which the data is collected
is from 1990 till 2018. On this basis, the annual time series data
is collected where the assumption of the classical time series
model is required to conduct testing for identifying whether the
data is stationary and the error containing the data has zero mean
and finite variance. Hence, the most appropriate technique for
measuring the stationary and non-stationary of data is through the
unit root. Similarly, Paparoditis and Politis (2018) has pointed out
in conducting the unit root test among the dataset as non-stationary
data can result in causing invalid empirical results of the standard
regression model. The technique adopted for conducting the unit
root test is through the Augmented Dickey Fuller (ADF) where
its model is expressed below:
0 1 2 1 1
1
c t c 1 c
n
t t t t
i
ni− −
=
Δ = τ + τ + τ + Δ + µ∑
In the model, Δ is identified as a difference operator while the
component n represents the lag and μt is reflected in the random
error of the stationary. With respect to the unit root test, the null
hypothesis is that ct is the non-stationary series.
3.2. Autoregressive Distributed Lag (ARDL)
The standard linear function for measuring the long term
association between the utilization of energy sources, financial
stability and prosperity in the economy of Indonesia is expressed
below:
2 LF EC RDC COt t t t t tC ϑ ϑ ϑ ϑ= β + + + + µ
With respect to the model, Ct is reflected the GDP per capita
of Indonesia, LF variable is reflected to the labour force, EC is
denoted as the energy consumption, RDC is indicated as the real
domestic credit to a private institution and CO2 is reflected to the
emissions of carbon dioxide and lastly, μt is defined as the usual
error. The existence of the long-term cointegration among the
variables identified has been measured through the ARDL. The use
of ARDL reflects on mainly two rationales in which the first reason
for the approach is that it is applicable regardless of the variables
consisting of stationary or non-stationary data. The second reason
is that the approach determines the cointegration association
regardless of low power. Furthermore, the error correlation model
(ECM) is applied to the dataset which is expressed below:
1 1 1
1 1 1
1 0 0
1 1
1 1 2 1 1 2 1
0 0
3 1 4 1 5 2 1
1
m n n
t i t i j t j j t j
i j j
n n
j t j j t j t t
j j
t t t t
C C LF EC
GRDC CO c LF
EC RDC CO
ϑ ϑ ϑ
ϑ ϑ γ γ
γ γ γ
− − −
= = =
− − − −
= =
− − −
Δ = β + Δ + Δ + Δ
+ Δ + Δ + +
+ + + + µ
∑ ∑ ∑
∑ ∑
Hanh, et al.: Utilization of Energy Sources, Financial Stability and Prosperity in the Economy of Indonesia
International Journal of Energy Economics and Policy | Vol 10 • Issue 5 • 2020634
The model above indicates that the null hypothesis is that the
cointegration among the variables Ct and regressor variables which
can be detected by the F-statistics. The null hypothesis model is
H0: γ1=γ2=γ3=γ4=γ5=0 on which if the value of F-statistics is below
the critical value, then it cannot be rejected. If the cointegration
among the variables is determined then the next step is required
in conducting long-run and short-run model which are provided
below respectively.
2 2 2
2 2 2
1 0 0
2 2
2 2 2 2
0 0
2
m n n
t i t i j t j j t j
i j j
n n
j t j j t j t
j j
C C LF EC
GRDC CO
ϑ ϑ ϑ
ϑ ϑ
− − −
= = =
− −
= =
Δ = β + Δ + Δ + Δ
+ Δ + Δ + µ
∑ ∑ ∑
∑ ∑
3 3 3
3 3 3
1 0 0
3 3
3 3 2 1 3
0 0
3
m n n
t i t i j t j j t j
i j j
n n
j t j j t j t t
j j
C C LF EC
GRDC CO
ϑ ϑ ϑ
ϑ ϑ φε
− − −
= = =
− − −
= =
Δ = β + Δ + Δ + Δ
+ Δ + Δ + + µ
∑ ∑ ∑
∑ ∑
Where ϕ is denoted as the statistically significant coefficient error
and is the negative sign which reveals as to how speedily the
variables are converging.
4. RESULTS
4.1. Descriptive
This section analyses the data and its characteristics using
descriptive statistics. The basic purpose of descriptive analysis is
to make inferences about the data and how the value exist with
respect to various measures.
The average of mean of the GDP per capita is 1139.72 with a
standard deviation of 1208.97. From these statistics this study
infers that a smaller standard deviation shows high level of
consistency in the values of the GDP per capital variable. The
maximum and minimum values are 3893.59 and 42.60 which
implies that during the period on average the GDP per capita
increased by 1139.72. Furthermore, the value of skewness shows
that the data have normal distribution and the Kurtosis of 3.18
indicates that in the distribution majority of the values are higher
than average value. Based on the significance value of Jarque-Bera
it can be inferred that the null hypotheses that GDP per capita has
normal distribution cannot be rejected.
Similarly in case of the mean of labour force the value is 7.83 and
the standard deviation indicates that the values lie within 7.88 of
the mean value. Since the standard deviation is relatively small
therefore it can be opined that there is high level of consistency
in the values of the labour force variable. The maximum and
minimum values are 8.12 and 7.31 which implies that during the
period on average the value of labour force increased by 7.83 on
average. In case of the coefficient of skewness the results indicate
that the data dos not follow normal distribution and supplementary
evidence to this assertion is that the value of Kurtosis of 2.37
from which it can be inferred that majority of the values in the
series are less than average value. Finally the significance value of
Jarque-Bera is 0.088 > 0.05 and indicates that the null hypotheses
that labour force follows a normal distribution has to be rejected.
In addition to this, change of real GDP of the Philippines is
29.12%; where minimum and maximum values were 28.61% and
29.85%. This indicates that on average the real GDP of Philippines
has increased by 29.12% on average, and in same period it has
went highest growth rate of 29.85%, and minimum growth during
the period was 28.61%. This indicates that real GDP change of the
Philippines is exceptionally high, making the country one of fastest
growing country in terms of real GDP. Meanwhile, the standard
deviation of the real GDP is 0.38% which is significantly lower,
and implies that real GDP has been increasing almost at constant
rate, and that is the reason behind lower standard deviation.
Furthermore, the mean of utilization of energy sources is
57.02 and standard deviation is 57.32 which is relatively high
and thus implies that the values are far spread from the mean
value. The maximum and minimum values are 85.72 and 35.94
respectively from which this study infers that on average the
value in the given period decreased from 85.72 to 35.94 by
57.02%. The coefficient of skewness is 0.23 which indicates
that it is closer to zero and thus follows normal distribution. In
addition, the Kurtosis value of 1.67 indicates that majority of the
values are lower than the average value. Based on significance
value of Jarque-Bera 0.107 > 0.05 this study infers that the
null hypothesis that consumption follows normal distribution
cannot be rejected.
GDP_PER_CAPITA__USD_ LABOUR_FORCE ENERGY_CONSUMPTION____ RDCPS CO2_EMISSION
Mean 1139.722 7.834933 57.02786 23.97410 232731.5
Median 608.4297 7.889321 57.32476 24.10451 191153.4
Maximum 3893.596 8.120452 85.71972 60.84890 637772.8
Minimum 42.60210 7.314386 35.94235 2.034623 23395.46
SD 1208.977 0.223191 16.06377 17.97300 186417.0
Skewness 1.278730 −0.663926 0.236267 0.281368 0.809230
Kurtosis 3.184799 2.374229 1.672805 1.992224 2.536585
Jarque-Bera 14.79318 4.848250 4.465652 2.997639 6.376880
Probability 0.000613 0.088556 0.107225 0.223394 0.041236
Sum 61545.01 423.0864 3079.505 1294.602 12567499
Sum Sq. Dev. 77466205 2.640153 13676.37 17120.53 1.84E+12
Observations 54 54 54 54 54
Hanh, et al.: Utilization of Energy Sources, Financial Stability and Prosperity in the Economy of Indonesia
International Journal of Energy Economics and Policy | Vol 10 • Issue 5 • 2020 635
Furthermore, the mean of RDCPS is 23.97 and standard deviation
is 24.10 which is relatively high and thus implies that the values
are far spread from the mean value. The maximum and minimum
values are 60.84 and 2.034 respectively from which this study
infers that on average the value in the given period increased from
2.034 to 60.84 by 23.97%. The coefficient of skewness is 0.281
which indicates that it is closer to zero and thus follows normal
distribution. In addition, the Kurtosis value of 1.99 indicates that
majority of the values are lower than the average value. Based on
significance value of Jarque-Bera 0.22 > 0.05 this study infers that
the null hypothesis that consumption follows normal distribution
cannot be rejected.
Finally, the mean of CO2_EMISSION is 232731.5 and standard
deviation is 191153.4 which is relatively high and thus implies
that the values are far spread from the mean value. The maximum
and minimum values are 637772.8 and 23395.46 respectively
from which this study infers that on average the value in the given
period increased from 23395.46 to 637772.8. The coefficient of
skewness is 0.809 which indicates that it is close to zero and thus
follows normal distribution. In addition, the Kurtosis value of 2.53
indicates that majority of the values are lower than the average
value. Based on significance value of Jarque-Bera 0.04>0.05 this
study infers that the null hypothesis that consumption follows
normal distribution must be rejected.
4.2. Unit Root Test
The purpose of conducting unit root test is to evaluate whether the
data is stationary or otherwise. In other words, provided that there
is a systematic pattern in the data there is a problem in the data
itself. If there are systematic patterns then it is almost impossible
to have forecasts for future values because there is a unit root in
the data. In addition, the unit root results are also used to evaluate
the trends in terms of random walk, assuming that there is the
prediction of future values will again be impossible. Overall the
test shows that if there is unit root in the data it implies that it is
non-stationary and there are systematic patterns and random walk
due to which the data cannot be used for prediction purposes.
Using the Augmented Dickey-Fuller (ADF) test unit root results
are summarized in following table for each variable:
4.3. ADF Unit Root Test
Augmented Dickey-Fuller test statistic t-Statistic Prob.
GDP_PER_CAPITA__USD 0.593 0.988
LABOUR_FORCE −3.86 0.004
ENERGY_CONSUMPTION −2.429 0.138
CO2_EMISSION 1.885 0.999
As per the null hypotheses of ADF test it is assumed that there is
unit root in the data. Using the statistics reported above it can be
inferred that the significance value of GDP_PER_CAPITA__USD
is .988 > 0.05 and thus it can be inferred that the null hypotheses
cannot be rejected and thus there is unit root in the data. Similarly,
in case of LABOUR_FORCE using the statistics reported above it
can be inferred that the significance value of LABOUR_FORCE
is 0.004 < 0.05 and thus it can be inferred that the null hypothesis
is rejected and thus the unit root does not exist in this variable.
Similarly, in case of ENERGY_CONSUMPTION using the
statistics reported above it can be inferred that the significance
value of ENERGY_CONSUMPTION is 0.138 > 0.05 and thus
it can be inferred that the null hypothesis is rejected and thus the
unit root does not exist in this variable. Similarly, in case of CO2_
EMISSION using the statistics reported above it can be inferred
that the significance value of CO2_EMISSION is 0.999>0.05 and
thus it can be inferred that the null hypothesis is rejected and thus
the unit root does not exist in this variable.
Based on the inferences above it can be concluded that none of
the variables can be used to apply of regression or VAR except
LABOUR_FORCE, therefore there is a need to use co-integration
testing and for this purpose this study conducted ARDL bounds
testing.
4.4. ARDL Models
The ARDL models are standardly regressed equations which use
both independent and dependent variables as regressors. Although
ARDL models have been employed in econometrics for many
decades, lately they have gained increasing popularity as a method
that explain dynamic long run and co-integrated relationships
between variables. Following table presents results of ARDL
bounds testing using GDP_PER_CAPITA__USD as independent
variable and LABOUR_FORCE, ENERGY_CONSUMPTION,
RDCPS, and CO2_EMISSION as Dynamic regressors (with 4
lags, automatic expansion through eviews).
The ARDL can only be applied when there are lagged values in
the dependent, the current, and lagged values of the independent
variable(s). Furthermore, ARDL uses both exogenous and
endogenous variables as regressors with the condition that no
variable be integrated of Order I(2) while some series may show
I(0) and I(1) order or if all variables show I(1) order. The ARDL
shows both short and long term relationship models provided that
there is co-integration and if there is no co-integration, the ARDL
model provide only short term models. The results below show
that there is long term relationship between utilization of energy
sources, financial stability and prosperity in the economy in case
of Indonesia.
F-Bounds test Null hypothesis: No levels relationship
Test statistic Value Sig. I(0) I(1)
Asymptotic: n=1000
F-statistic 5.950777 10% 2.2 3.09
k 4 5% 2.56 3.49
2.5% 2.88 3.87
1% 3.29 4.37
Actual
sample size
53 Finite sample: n=55
10% 2.345 3.28
5% 2.763 3.813
1% 3.738 4.947
Finite sample: n=50
10% 2.372 3.32
5% 2.823 3.872
1% 3.845 5.15
The results above indicate that f-statistics 5.95> I (1) at 10%, 5%,
2.5%, and 1% from which this study concludes that we have to
Hanh, et al.: Utilization of Energy Sources, Financial Stability and Prosperity in the Economy of Indonesia
International Journal of Energy Economics and Policy | Vol 10 • Issue 5 • 2020636
reject the null hypotheses which is no relationship at all levels and
hence, it can be concluded that there is a long term relationship
with utilization of energy sources and financial stability as
independent variable and prosperity in the economy as dependent
variable in case of Indonesia.
5. CONCLUSIONS
The aim of this study was to explore the relationship between
utilization of energy sources, financial stability and prosperity in
the economy of Indonesia. For this purpose this study conducted
panel data analysis and gathered data from 1990 to 2018. The
study explored the relationship of CO2 emissions and utilization
of energy sources per capita as indicators of utilization of energy
sources. The indicators for financial stability were real domestic
credit to the private sector where the financial information of
different financial institutions operating in Indonesia has been
collected. The prosperity in the economy indicator for Indonesia
was GDP per capita and also the labour force that works within
different sectors operating in the country. The results of showed
that there is co-integration between utilization of energy sources,
financial stability and prosperity in the economy indictors of
Indonesia.
The results above are consistent with past studies. Consider for
example, Erahman et al. (2016) who posited that the prosperity
in the economy in Indonesian economy shows dependence on its
energy sector because this country has rich natural resources as
compared to other countries in Asia. The relationship between
prosperity in the economy and utilization of energy sources was
reflected by unidirectional causality between with income and
utilization of energy sources as indicators. Furthermore, it was
also shown that with increase in the trade openness in Indonesia
the efficiency of its exports of energy resources also showed
improvement with a positive impact on the GDP of the economy.
These results were matching those provided in Bakirtas and
Akpolat (2018).
Considering the broader prospective of developing countries and
not specifically Indonesia Farabi et al. (2019) showed that the
developing countries with rich energy resources show positive
prosperity in the economy with high pace as they increase their
exports of oil and gas across the globe. However, there are also
studies that show mixed results in terms of relationship between
utilization of energy sources and prosperity in the economy. For
instance, although there was a positive impact of utilization of
energy sources on prosperity in the economy in short run, in the
long run the results showed that there were different obstacles
facing prosperity in the economy of Indonesia.
Throughout this study, there have been some limitations that
restricted the study towards limited data collection and also
towards findings that could be more detailed. Firstly, there was
the limitation of the time span on the basis of which the data
collection and data analysis became restricted due to the short
time span. Moreover, this study has only been focused on the
energy growth of Indonesia that only provided the data based on
the energy sector and financial institutions operating in Indonesia.
However, this study could have been conducted in other Asian
countries that are growing at a rapid pace. Furthermore, this study
could have also focused on other sectors other than energy and
financial sectors that could have given more detailed findings in
terms of the impact of these other sectors on the prosperity in the
economy of Indonesia.
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