The Determinants of Trade Balance and Adjustment to the Crisis in Indonesia
AbstractThis paper investigates the effects of real exchange rate depreciation and supply side shocks on exports and imports. Indonesia provides an interesting case study of the subject because this country experienced a large depreciation, banking sector collapse, and socio-political turbulence during the Asian crisis episode. The results suggest that trade balance will improve following devaluation through an increase in exports and a collapse in imports. Because the elasticity of imports with respect to the real exchange rate is greater than that of exports, improvement in trade balance would be mainly come from import compression. It is also found that export performance could have been far better if Indonesia did not suffer from banking problems and socio-political turbulence.
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Bibliographic InfoPaper provided by University of Adelaide, Centre for International Economic Studies in its series Centre for International Economic Studies Working Papers with number 2005-08.
Length: 30 pages
Date of creation: Jun 2005
Date of revision:
Real Exchange Rate; Export; Import; Indonesia.;
Find related papers by JEL classification:
- F10 - International Economics - - Trade - - - General
- F31 - International Economics - - International Finance - - - Foreign Exchange
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