Indonesia's Export Performance: Supply or Demand Driven?


Event details

Date & time

Friday 10 September 2010


Seminar Room B, Coombs Building, Fellows Road, ANU


Titik Anas, PhD Candidate, ACDE; Panel Member: Prof Hal Hill, Premachandra Athukorala; Discussant: Andrew Kam


Sandra Zec

Indonesian export has been slowing down in the post crisis period. Earlier study indicates that the slowing down of exports is mainly due to supply side problem. This paper employs two different methods in explaining whether the performance is driven by demand or supply factors: constant market analysis and time series econometric analysis. Export growth decomposition using constant market share analysis indicates the slowing down in export is due to declining competitiveness of Indonesian manufacturing exports and oil sector. Time series analysis using Pesaran bound testing on total exports, manufacturing exports, oil exports and non-oil exports for the period of 1976-2008 shows prices, production capacity and foreign direct investment (FDI) stock are significant variables in explaining Indonesian long term export performance. This supports earlier conjecture that Indonesian export performance is supply driven. This paper also estimates price elasticity of export, one estimates for long term own price elasticity of exports is -0.5 for total exports, - 0.98 for non oil export and -0.43 for manufacturing. Meanwhile, own price elasticity for mining exports is found to be +0.42. In contrast, price is not a significant variable for agriculture export while income and production capacity are significant variables in explaining agriculture exports performance.

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