Leveraging Fiscal Policy for Indonesia’s Creative Economy: An Empirical Roadmap from Integrated Multivariate Time Series and Input-Output Analysis

Abstract

This study provides a comprehensive examination of how government expenditure functions as an exogenous fiscal policy instrument to influence Indonesia's creative economy. Employing an integrated methodological approach that combines Vector Autoregression with exogenous variables and structural Input Output analysis, the research analyzes dynamic responses across nine strategically selected creative sectors including the Food and Beverage Industry, Textile and Apparel Industry, Wood Products and Weaving, Paper and Printing Industry, Furniture Industry, Food and Beverage Provision, Information and Communication, Business Services, and Other Services. The empirical investigation generates several critical findings. Primarily, government spending shocks produce statistically significant reductions in open unemployment rates within labor-intensive sectors, while demonstrating largely marginal or nonsignificant effects on both sectoral gross domestic product and inflation levels. Furthermore, by systematically cross-referencing these dynamic temporal responses with enduring structural economic linkages, the analysis identifies and characterizes four distinct sectoral clusters. The key Sectors comprising the Food and Beverage, Textile and Apparel, and Paper and Printing Industries exhibit pronounced fiscal responsiveness coupled with robust economic multiplier effects. Potential Sectors, including Wood Products and Weaving, furniture, and Food and Beverage Provision, show substantial impacts on the labor market, with valuable opportunities for enhanced value chain integration. Developing Sectors, specifically Information and Communication and Business Services, display growth patterns driven by Innovation, necessitating ecosystem support rather than direct fiscal stimulus. Lagging Sectors, represented by Other Services, possess considerable cultural value but require alternative financing mechanisms due to their limited economic integration. These empirical insights are synthesized into a concrete, evidence-based policy prioritization framework. This framework provides differentiated fiscal strategy recommendations for each cluster, aiming to optimize government resource allocation and foster sustainable, inclusive development within Indonesia's creative economy, thereby contributing directly to the objectives outlined in Sustainable Development Goal 9, focusing on industry, Innovation, and infrastructure.