This study aims to see the determinants of investment and its effect on poverty in Indonesia. This research uses two analysis that is long-term equilibrium analysis by using cointegration equation and short term analysis with ECM (Error Correction Model) linear regression method. The secondary data used was obtained from Indonesian Central Bureau of Statistics, Bank Indonesia, period 1990-2016.
Based on the results obtained, where together the determinants of investment affect the investment. Domestic investment (PMDN) and foreign investment (FDI) are simultaneously affecting poverty, while all investment determinants simultaneously affect poverty, as well as spawning government with routine expenditure procurement, development spending and shared regional spending affect investment and is crowding in.
To ensure the growth of private investment, and to reduce poverty in Indonesia, it is recommended that the government maintain the stability of its spending expenditures, in particular spending on local spending, and maintain economic stability, in particular the gross regional domestic product, interest rate, inflation and human development index, these variables are instrumental in encouraging private investors to invest their capital, and contribute to the development of the State's economy, as well as opening up employment as widely as possible, thereby reducing poverty in Indonesia. In addition to reducing poverty in particular, the government should keep the increase in routine expenditure, and the development expenditure.
Keywords: Investment Determinant, Investment, Poverty, Government Expenditure, Cointegration Test, and Error Correction Model (ECM)