Examining the Effect of Investment, Zakat and Poverty on Economic Growth in Indonesia: A Moderation Analysis

Irpan Deni Syahwitra; Suriani Suriani; Muhammad Nasir

doi:10.56225/finbe.v3i2.314

Authors

Irpan Deni Syahwitra Department of Economics, Faculty of Economics and Business, Universitas Syiah Kuala, Kopelma Darussalam, 23111 Syiah Kuala, Banda Aceh, Aceh, Indonesia
Suriani Suriani Department of Economics, Faculty of Economics and Business, Universitas Syiah Kuala, Kopelma Darussalam, 23111 Syiah Kuala, Banda Aceh, Aceh, Indonesia
Muhammad Nasir Department of Economics, Faculty of Economics and Business, Universitas Syiah Kuala, Kopelma Darussalam, 23111 Syiah Kuala, Banda Aceh, Aceh, Indonesia

DOI:

https://doi.org/10.56225/finbe.v3i2.314

Keywords:

Economic Growth, Foreign Direct Investment, DDomestic Direct Investment, Poverty, Zakat

Abstract

Economic growth denotes a sustained increase in a nation's production of goods and services, functioning as a crucial indicator of economic vitality and advancement. This phenomenon reflects improved living standards, such as elevated income levels and enhanced prosperity. This study investigates the moderating role of investment and zakat in the relationship between poverty and economic growth. Utilising annual panel data from 30 provinces from 2018-2022, this study employs Moderated Regression Analysis (MRA) to examine how zakat influences this relationship. This analysis aims to determine whether zakat amplifies or diminishes the impact of poverty on economic growth. The findings reveal that domestic and foreign investment has distinct effects on economic growth with varying impacts across different contexts. Poverty was found to have a significant negative effect on economic growth, underscoring the importance of addressing poverty in fostering sustainable development. Zakat demonstrated a significant negative moderating effect on the relationship between poverty and economic growth. This suggests that, under current management practices, zakat may not be as effective in alleviating poverty or supporting growth as intended. Based on these results, this study recommends improving zakat management in Indonesia, highlighting its potential to play a more substantial role in poverty reduction and economic development. Strengthening the administration and distribution of zakat could enhance its effectiveness in promoting equitable growth and reducing poverty, ultimately contributing to a more inclusive and prosperous economy.

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