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How Do Foreign and Domestic Demand Affect Exports Performance? An Econometric Investigation of Indonesia's Exports

Author

Listed:
  • Rudy Rahmaddi

    (Graduate School for International Development and Cooperation, Hiroshima University)

  • Masaru Ichihashi

    (Graduate School for International Development and Cooperation, Hiroshima University)

Abstract

This paper explores the impacts of foreign and domestic demand on Indonesia's exports within demand and supply frameworks using aggregate data of 1971 - 2007. To capture effects of secular and cyclical movements on exports, we dissect income variables into trend and business cycle as proxies of productive capacity and capacity utilization rate, respectively. Our result suggests that both demand- and supply-price elasticity are elastic, and secular and cyclical movements may have contrast effects on exports. The findings draw policy implications namely the importance of price-based policy, provision of adequate and sound infrastructures, and further development of human capital-based industrialization.

Suggested Citation

  • Rudy Rahmaddi & Masaru Ichihashi, 2011. "How Do Foreign and Domestic Demand Affect Exports Performance? An Econometric Investigation of Indonesia's Exports," IDEC DP2 Series 1-4, Hiroshima University, Graduate School for International Development and Cooperation (IDEC), revised Jan 2012.
  • Handle: RePEc:hir:idecdp:1-4
    as

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    File URL: http://ir.lib.hiroshima-u.ac.jp/metadb/up/ZZT00001/IDEC-DP2_01-4.pdf
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    File URL: http://ir.lib.hiroshima-u.ac.jp/files/public/31690/20141016182313148602/IDEC-DP2_01-4R.pdf
    File Function: Revised version, 2012
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Exports; demand and supply for exports; domestic demand pressure; Indonesia; simultaneous equations.;

    JEL classification:

    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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