The Impact of Government Financing Programme and Inflation on Purchasing Power in South Sulawesi

Abstract

As a regulator, the Government has a responsibility to enchance welfare and prosperity. Micro, Small, and Medium Enterprises (MSMEs), being the largest contributors to the economy, play a strategic role in improving people's welfare. Therefore, the development of MSMEs should be a priority for the Government. This research aims to analyze the impacts of the Government Financing Programme and Inflation Rate on People's Purchasing Power in the regencies and cities of South Sulawesi Province. This study utilized panel data comprising 126 observations from 24 regencies and cities in South Sulawesi, covering time series data from 2017 to 2022 with secondary data consisting of per capita expenditure, distribution of Kredit Usaha Rakyat (KUR), inflation rate, and a dummy variable for COVID-19. Using a quantitative approach with multiple linear regression, this research applies the Random Effect Model (REM) with Generalized Least Squares (GLS), based on the testing methods and relevant literature. The results of this research show that the Government Financing Programme variable has provide statistically significant benefits or a positive impact on enchancing people's purchasing power, while the inflation rate has a statistically significant negative effect on it.