STUDY OF CYCLICITY AND MACROECONOMIC IMPACT ON INVEST- MENT FLOWS IN EAST JAVA

Abstrak

This paper aims to analysis the cyclicity pattern and to estimates the effect of  macroeconomics indicators on capital inflows in East Java. The first analysis by using  Hodrick-Prescott (HP) filter shows that capital inflows in East Java have a tendency to  move in procyclical pattern. While the second by using VAR analysis shows that  macroeconomics indicators are dominant factor for investors to invest their funds in  East Java. Likewise, this paper indicates the pattern of capital inflows in East Java is  tend to procyclical. Moreover,the macroeconomics indicators that affect capital  inflows in East Java are economic growth and inflation. Based on the result, this  paper suggest for local governments to synchronize the development of capital  inflows together with macroeconomics conditions. Furthermore, the capital inflows  can be managed properly to avoid the “surges” and “sudden stop” phenomenon.