Applying Keynesian theory to identify determinants of gross regional domestic product: Comparative evidence from Java and Sumatra

This paper analyzes the application of Keynesian theory to identify the determinants of Gross Regional Domestic Product (GRDP) in Java and Sumatra. The study utilizes panel data from 2013 to 2023 across 6 provinces in Java and 10 in Sumatra, employing a fixed effects panel regression to assess the impact of regional expenditure, FDI, DDI, and local taxes on GRDP. Findings reveal that all variables significantly affect GRDP in Java, while in Sumatra, FDI does not have a significant effect. Java demonstrates a more substantial impact of regional expenditure and investment on economic growth than Sumatra. This research extends the empirical application of Keynesian theory to the regional context in Indonesia, highlighting structural differences in economic drivers between Java and Sumatra. The results suggest that policy interventions in Sumatra should focus on enhancing infrastructure and investment climate to improve the effectiveness of FDI and government spending. Sustainable Development Goals (SDGs): SDG 8: Decent Work and Economic Growth; SDG 10: Reduced Inequalities; SDG 17: Partnerships for the Goals