Trade Policy and Economic Growth In Indonesia
The paper examines trade policy and economic growth for Indonesia. The paper has employed Cointegration and Granger Causality test to study the long-run and short-run dynamics among exports growth, imports growth and real output growth over the period 1970 to 2010. The results of the long-run equation get the coefficients that are positive and negative values that means exports growth contributes to the economic growth but imports growth has a negative contribution to economic growth for Indonesia. The results, multivariate Granger Causalityy test, indicate feedback effects between imports and output growth in the short-run, but no evidence feedback effects between exports and output growth for Indonesia. We only find evidence a effect from output growth to exports. However, a strong feedback effects between import growth and export growth has also been established.
Keywords: Trade policy, Multivariate Granger causality test.
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