This paper investigates the empirical relationship between economic growth, inflation, foreign direct investment (FDI), and trade on Indonesia’s poverty reduction. The analyzed data period is 1970–2022 using the nonlinear autoregressive distributed lag (NARDL) model. In the long term, positive and negative shocks to economic growth and FDI significantly affect poverty in Indonesia. Increased growth and FDI will have a significant effect on poverty alleviation. Likewise, when there are negative shocks from economic growth and FDI, it will increase the percentage of the poverty rate. Meanwhile, the inflation variable has a different effect on the conditions of positive and negative shocks. In positive shocks, inflation has a positive and insignificant effect, while in negative shocks, inflation has a negative and significant effect on poverty. It shows that a decrease in the price of goods significantly impacts poverty alleviation in the long term. Furthermore, trade has no significant effect in the long term in both positive and negative shocks. The short-term estimation results show that all variables are significant for positive and negative shocks, except for positive shocks of inflation and negative shocks of trade. Therefore, it is recommended that the government adopt a poverty reduction program by improving more stable economic growth instruments, increasing foreign investment that is more labor-intensive, and controlling inflation more effectively to avoid unreasonable increases in the price of goods.

poverty; growth; inflation; foreign direct investment; asymmetric

1. Afandi, A., Wahyuni, D., & Sriyana, J. (2017). Policies to Eliminate Poverty Rate in Indonesia. International Journal of Economics and Financial Issues, 7(1), 435–441.
2. Agusalim, L. (2017). The Dynamic Impact of Trade Openness on Poverty: An Empirical Study of Indonesia’s Economy. International Journal of Economics and Financial Issues, 7(1), 566–574.
3. Ahmad, F., Draz, M. U., Su, L., et al. (2019). Impact of FDI inflows on poverty reduction in the ASEAN and SAARC economies. Sustainability, 11(9), 1–24. https://doi.org/10.3390/su11092565
4. Akoum, I. F. (2008). Globalization, growth, and poverty: The missing link. International Journal of Social Economics, 35(4), 226–238. https://doi.org/10.1108/03068290810854529
5. Amaliah, I., Aspiranti, T., Nurhayati, N., et al. (2021). Macroeconomic coordination: As an approach for poverty reduction. Polish Journal of Management Studies, 23(2), 42–56. https://doi.org/10.17512/pjms.2021.23.2.03
6. Amponsah, M., Agbola, F. W., & Mahmood, A. (2023). The relationship between poverty, income inequality and inclusive growth in Sub-Saharan Africa. Economic Modelling, 126, 106415. https://doi.org/10.1016/j.econmod.2023.106415
7. Babatunde, M. A., Oyeranti, O. A., Bankole, A. S., et al. (2012). Exports trade, employment and poverty reduction in Nigeria. International Journal of Social Economics, 39(11), 875–899. https://doi.org/10.1108/03068291211263916
8. Balasubramanian, P., Burchi, F., & Malerba, D. (2023). Does economic growth reduce multidimensional poverty? Evidence from low- and middle-income countries. World Development, 161, 106119. https://doi.org/10.1016/j.worlddev.2022.106119
9. BPS Nasional. (2024). Number of Poor People, Percentage of Poor People and Poverty Line (Indonesian). Available online: https://www.bps.go.id/id/statistics-table/1/MTQ5NCMx/jumlah-penduduk-miskin.html (accessed on 21 March 2024).
10. Brooks, C. (2014). Introductory econometrics for finance. Cambridge University Press.
11. Cardoso, E. (1992). Inflation and poverty (No. w4006). National Bureau of Economic Research. https://doi.org/10.3386/w4006
12. Dada, J. T., & Akinlo, T. (2021). Foreign direct investment and poverty reduction in sub‑Saharan Africa: does environmental degradation matter? Future Business Journal, 7(1), 1–10. https://doi.org/10.1186/s43093-021-00068-7
13. Dauda, R. S. (2016). Poverty and economic growth in Nigeria: Issues and policies poverty. Journal of Poverty, 5549, 1–19. https://doi.org/10.1080/10875549.2016.1141383
14. Dewi, S., Abd Majid, M. S., Aliasuddin, et al. (2018). Dynamics of financial development, economic growth, and poverty alleviation: The Indonesian experience. South East European Journal of Economics and Business, 13(1), 17–30. https://doi.org/10.2478/jeb-2018-0002
15. Do, Q. A., Le, Q. H., Nguyen, T. D., et al. (2021). Spatial impact of foreign direct investment on poverty reduction in Vietnam. Journal of Risk and Financial Management, 14(7), 1–16. https://doi.org/10.3390/jrfm14070292
16. Easterly, W., & Fischer, S. (2001). Inflation and the Poor. Journal of Money, Credit and Banking, 33(2), 160–178. https://doi.org/10.2307/2673879
17. Elheddad, M., Bassim, M., & Ahmed, R. (2021). FDI and economic growth in the GCC: Does the oil sector matter? Economics and Business Letters, 10(3), 178–190. https://doi.org/10.17811/ebl.10.3.2021.178-190
18. Elliott, G., Rothenberg, T. J., & Stock, J. H. (1992). Efficient tests for an autoregressive unit root. National Bureau of Economic Research. https://doi.org/10.3386/t0130
19. Estrades, C., & Terra, M. I. (2012). Commodity prices, trade, and poverty in Uruguay. Food Policy, 37(1), 58–66. https://doi.org/10.1016/j.foodpol.2011.11.007
20. Faharuddin, F., Yamin, M., Mulyana, A., et al. (2023). Impact of food price increases on poverty in Indonesia: empirical evidence from cross-sectional data. Journal of Asian Business and Economic Studies, 30(2), 126–142. https://doi.org/10.1108/JABES-06-2021-0066
21. Fosu, A. K. (2015). Growth, inequality and poverty in Sub-Saharan Africa: Recent progress in a global context. Oxford Development Studies, 43(1), 44–59. https://doi.org/10.1080/13600818.2014.964195
22. Goff, M., & Singh, R. J. (2014). Does trade reduce poverty? A view from Africa☆. Journal of African Trade, 1(1–2), 5. https://doi.org/10.1016/j.joat.2014.06.001
23. Hanim, W. (2021). How Does Foreign Direct Investment (FDI) Reduce Poverty? Application of the Triangular Hypothesis for the Indonesian Case. Review of Integrative Business and Economics Research, 10(1), 400.
24. Haruna, M., Hassan, S., & Ahmad, H. (2023). How responsive is the poverty to the foreign direct investment inflows in Nigeria? Evidence from linear and non-linear ARDL. International Journal of Social Economics, 50(1), 1–23. https://doi.org/10.1108/IJSE-08-2020-0530
25. Ianchovichina, E., Nicita, A., & Soloaga, I. (2002). Trade reform and poverty: The case of Mexico. World Economy, 25(7), 945–972. https://doi.org/10.1111/1467-9701.00473
26. Javid, A. Y., Javid, M., & Awan, A. Z. (2013). Electricity consumption and economic growth: Evidence from Pakistan. Economics and Business Letters, 2(1), 21–32. https://doi.org/10.1080/15567249.2017.1349211
27. Junaidin, J., & Muniarty, P. (2020). Influence of inflation on poverty in Bima city. Ilomata International Journal of Management, 1(3), 88–92. https://doi.org/10.52728/ijjm.v1i3.119
28. Kis-Katos, K., & Sparrow, R. (2015). Poverty, labor markets and trade liberalization in Indonesia. Journal of Development Economics, 117, 94–106. https://doi.org/10.1016/j.jdeveco.2015.07.005
29. Lee, N., & Sissons, P. (2016). Inclusive growth? The relationship between economic growth and poverty in British cities. Environment and Planning A, 48(11), 2317–2339. https://doi.org/10.1177/0308518X16656000
30. Maertens, M., & Swinnen, J. F. M. (2009). Trade, standards, and poverty: Evidence from Senegal. World Development, 37(1), 161–178. https://doi.org/10.1016/j.worlddev.2008.04.006
31. Magombeyi, M. T., & Odhiambo, N. M. (2018). Dynamic impact of FDI inflows on poverty reduction: Empirical evidence from South Africa. Sustainable Cities and Society, 39, 519–526. https://doi.org/10.1016/j.scs.2018.03.020
32. McCaig, B. (2011). Exporting out of poverty: Provincial poverty in Vietnam and U.S. market access. Journal of International Economics, 85(1), 102–113. https://doi.org/10.1016/j.jinteco.2011.05.007
33. Meo, M., Khan, V. J., Ibrahim, T. O., et al. (2018). Asymmetric impact of inflation and unemployment on poverty in Pakistan: new evidence from asymmetric ARDL cointegration. Asia Pacific Journal of Social Work and Development, 28(4), 295–310. https://doi.org/10.1080/02185385.2018.1523745
34. Muda, I., Nurlina., Erlina, et al. (2020). Stage of takeoff based on Rostow’s theory for the role of manufacture of non-metals, except petroleum and coal manufacture to the economic increase. Research in World Economy, 11(5), 177–185. https://doi.org/10.5430/rwe.v11n5p177
35. Mulok, D., Kogid, M., Asid, R., et al. (2012). Is economic growth sufficient for poverty alleviation? Empirical evidence from Malaysia. Cuadernos de Economia, 35(97), 26–32. https://doi.org/10.1016/S0210-0266(12)70020-1
36. Naranpanawa, A., & Arora, R. (2014). Does trade liberalization promote regional disparities? Evidence from a multiregional CGE model of India. World Development, 64, 339–349. https://doi.org/10.1016/j.worlddev.2014.06.001
37. Naranpanawa, A., Bandara, J. S., & Selvanathan, S. (2011). Trade and poverty nexus: A case study of Sri Lanka. Journal of Policy Modeling, 33(2), 328–346. https://doi.org/10.1016/j.jpolmod.2010.08.008
38. Nessa, H.T., & Imai, K. S. (2023). Trade openness and working poverty: empirical evidences from developing countries. International Trade, Politics and Development, 7(2), 58–76. https://doi.org/10.1108/itpd-08-2022-0018
39. Nurjannah, N., Masbar, R., Majid, M. S. A., et al. (2023). Inter-regional trade and economic growth of ASEAN low middle income: Are corruption control and HDI important? Cogent Economics and Finance, 11(2). https://doi.org/10.1080/23322039.2023.2230733
40. Olaniyi, C. O., & Odhiambo, N. M. (2024). Inflation-poverty causal nexus in sub-Saharan African countries: an asymmetric panel causality approach. International Trade, Politics and Development, 8(1), 34–64. https://doi.org/10.1108/itpd-08-2023-0024
41. Phillips, P. C., & Perron, P. (1988). Testing for a unit root in time series regression. Biometrika, 75(2), 335–346. https://doi.org/10.1093/biomet/75.2.335
42. Rehman, A., Cismas, L. M., & Milin, I. A. (2022). “The three evils”: Inflation, poverty and unemployment’s shadow on economic progress: A novel exploration from the asymmetric technique. Sustainability, 14(14), 1–16. https://doi.org/10.3390/su14148642
43. Rehman, S., Ullah, S., Azim, F., et al. (2023). Impact of financial development, energy consumption and urbanization on CO 2 emissions from buildings using quantile ARDL model. Journal of Infrastructure, Policy and Development, 7(3), 1–18. https://doi.org/10.24294/jipd.v7i3.2166
44. Ridha, A., Masbar, R., Aliasuddin, et al. (2022). Asymmetric price transmission in the cocoa supply chain in Indonesia. Economia Agro-Alimentare, 24(1), 1–21. https://doi.org/10.3280/ecag2022oa12888
45. Romer, C., & Romer, D. (1998). Monetary policy and the well-being of the poor (No. w6793). National Bureau of Economic Research. https://doi.org/10.3386/w6793
46. Santos, M. E., Dabus, C., & Delbianco, F. (2019). Growth and Poverty Revisited from a Multidimensional Perspective. Journal of Development Studies, 55(2), 260–277. https://doi.org/10.1080/00220388.2017.1393520
47. Setiawan, M., Indiastuti, R., Hidayat, A. K., et al. (2021). R&D and industrial concentration in the Indonesian manufacturing industry. Journal of Open Innovation: Technology, Market, and Complexity, 7(2), 1–12. https://doi.org/10.3390/joitmc7020112
48. Shin, Y., Yu, B., & Greenwood-nimmo, M. (2014). Modelling asymmetric cointegration and dynamic multipliers in a nonlinear ARDL framework. In Festschrift in Honor of Peter Schmidt. Springer. https://doi.org/10.1007/978-1-4899-8008-3
49. Škare, M., & Družeta, R. P. (2016). Poverty and economic growth: a review. Technological and Economic Development of Economy, 22(1), 156–175. https://doi.org/10.3846/20294913.2015.1125965
50. Sofjan, M. (2018). The relationship between trade liberalisation, poverty and inequality: The case of Indonesia. International Journal of Economic Policy in Emerging Economies, 11(5), 441–456. https://doi.org/10.1504/IJEPEE.2018.094803
51. Sotiropoulou, T., Giakoumatos, S., & Georgopoulos, A. (2023). Financial development, economic growth, and income inequality: A Toda-Yamamoto panel causality test. Economics and Business Letters, 12(2), 172–185. https://doi.org/10.17811/ebl.12.2.2023.172-185
52. Sultanuzzaman, M. R., Fan, H., Akash, M., et al. (2018). The role of FDI inflows and export on economic growth in Sri Lanka: An ARDL approach. Cogent Economics and Finance, 6(1), 1–17. https://doi.org/10.1080/23322039.2018.1518116
53. Suryanta, B., & Patunru, A. (2023). Trade impediments in Indonesia. Journal of Economic Integration, 38(2), 247–277. https://doi.org/10.11130/jei.2023.38.2.247
54. Tambunan, T. (2005). The impact of Foreign Direct Investment on poverty reduction: A survey of literature and a temporary finding from Indonesia. In: Proceedings of the Consultative Meeting on “Foreign Direct Investment and Policy Changes: Areas for New Research. Bangkok, Thailand. pp. 1–49.
55. Tsaurai, K. (2018). Investigating the impact of foreign direct investment on poverty reduction efforts in Africa. Revista Galega de Economia, 27(2), 139–154. https://doi.org/10.15304/rge.27.2.5664
56. Ucal, M. Ş. (2014). Panel data analysis of foreign direct investment and poverty from the perspective of developing countries. Procedia-Social and Behavioral Sciences, 109, 1101–1105. https://doi.org/10.1016/j.sbspro.2013.12.594
57. Verico, K., & Pangestu, M. E. (2021). The economic impact of globalisation in Indonesia. In: Globalisation and its Economic Consequences: Looking at APEC Economies. Routledge. pp. 76–102. https://doi.org/10.4324/9781003138501-4
58. Walinono, A., Arifuddin, Nohong, M., et al. (2022). Ananalysis of determinants of poverty rates in Indonesia. Journal of Positive School Psychology, 6(6), 8581–8595.
59. Wang, J., & Hu, Y. (2018). The impact of trade liberalization on poverty reduction in rural China. China Agricultural Economic Review, 10(4), 683–694. https://doi.org/10.1108/CAER-01-2018-0019
60. Winters, L. A., McCulloch, N., & McKay, A. (2004). Trade liberalization and poverty: The evidence so far. Journal of Economic Literature, 42(1), 72–115. https://doi.org/10.1257/002205104773558056