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The Dynamics Of Manufacturing Industry And The Response Toward Business Cycle

Author

Listed:
  • Yati Kurniati

    (Bank Indonesia)

  • Yanfitri

    (Bank Indonesia)

Abstract

The role of the manufacturing industry in the economy has expanded significantly from 19 percent in 1990 to 26 percent in 2009, while its labor absorption only increased from 10 percent to 12.2 percent. The cycle of the manufacturing industry has been in line with the economic growth. This study explores the implications of the firm-level heterogeneity over the business cycle. By using the panel multinomial logit, it shows that firms with less capital and small size have greater probability to exit the industry during the boom/bust period. Sensitivity of the company to changes in capital is greater during the boom period. Only highly productive firms enter and begin production during recessions. Companies with higher productivity rate also have greater probability to enter the market. In contrast, higher production cost and higher market concentration increase the probability for smaller companies to exit from the industry.

Suggested Citation

  • Yati Kurniati & Yanfitri, 2010. "The Dynamics Of Manufacturing Industry And The Response Toward Business Cycle," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 13(2), pages 1-34, October.
    • Handle: RePEc:idn:journl:v:13:y:2010:i:2e:p:1-34
    DOI: https://doi.org/10.21098/bemp.v13i2.388
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    More about this item

    Keywords

    Production; Cost; Capital and Total Factor Productivity; Industry Studies Manufacturing; Business Fluctuations/cycles;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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