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An Assessment of Indonesia s Monetary Integration with Oil Exporter Countries in Islamic Nations: Evidence from Panel Data

Author

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  • Memet Agustiar

    (Department of Economics and Business, University of Tanjungpura, Pontianak, Indonesia.)

Abstract

The paper aims to assess the monetary integration between Indonesia and oil exporting countries in Islamic countries. Increasing the oil trade intensity between Indonesia and oil-producing countries can drive monetary integration among them. This study applies the Optimum Currency Area (OCA) index to measure the degree of monetary integration between Indonesia and 21 oil-producing countries in the OIC. The results exhibit that the majority of oil-producing countries are strongly integrated with Indonesia. The panel regression test highlights two variables the inflation similarity and trade openness which had a significant effect on the OCA. This study provides an important policy base for Indonesia, primarily in improving its relations with oil-producing countries. Two channels trade openness and maintaining harmonious price stability are the entry point for Indonesia to integrate with oil countries.

Suggested Citation

  • Memet Agustiar, 2020. "An Assessment of Indonesia s Monetary Integration with Oil Exporter Countries in Islamic Nations: Evidence from Panel Data," International Journal of Energy Economics and Policy, Econjournals, vol. 10(1), pages 89-95.
    • Handle: RePEc:eco:journ2:2020-01-13
    as

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    References listed on IDEAS

    as
    1. Frankel, Jeffrey A & Rose, Andrew K, 1998. "The Endogeneity of the Optimum Currency Area Criteria," Economic Journal, Royal Economic Society, vol. 108(449), pages 1009-1025, July.
    2. Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-673, September.
    3. Gouveia, Sofia & Correia, Leonida, 2013. "Trade Integration and Business Cycle Synchronization in the Euro Area: The Case of Southern European Countries," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 28, pages 85-107.
    4. ACAR, Mustafa & ALPAY, Savas, 2009. "South – East Asian Integration in the Context of OIC: Implications of Free Trade among Malaysia, Indonesia and Bangladesh," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 24, pages 1-18.
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    Cited by:

    1. Nisful Laila & Aam S. Rusydiana & Muhamad Iqbal Irfany & Imron HR & Popon Srisusilawati & Muhamad Taqi, 2021. "Energy Economics in Islamic Countries: A Bibliometric Review," International Journal of Energy Economics and Policy, Econjournals, vol. 11(2), pages 88-95.
    2. Memet Agustiar, 2020. "Monetary Integration among Oil Exporter Countries: Testing Kenen s Product Diversification Hypothesis in the Organization of Islamic Cooperation," International Journal of Energy Economics and Policy, Econjournals, vol. 10(3), pages 380-388.

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    More about this item

    Keywords

    Monetary integration; Optimum Currency Area; Islamic nations; Indonesia; oil countries.;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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