The Determinants of Trade Balance and Adjustment to the Crisis in Indonesia
This 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.
|Date of creation:||Jun 2005|
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- Sweder van Wijnbergen, 1986.
"Exchange Rate Management and Stabilization Policies in Developing Countries,"
in: Economic Adjustment and Exchange Rates in Developing Countries, pages 17-42
National Bureau of Economic Research, Inc.
- Van Wijnbergen, Sweder, 1986. "Exchange rate management and stabilization policies in developing countries," Journal of Development Economics, Elsevier, vol. 23(2), pages 227-247, October.
- Hal Hill, 1999.
"Indonesia : The Strange and Sudden Death of a Tiger Economy,"
UP School of Economics Discussion Papers
199913, University of the Philippines School of Economics.
- Hal Hill, 2000. "Indonesia: The Strange and Sudden Death of a Tiger Economy," Oxford Development Studies, Taylor & Francis Journals, vol. 28(2), pages 117-139.
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