Trade Policy and Economic Growth In Indonesia

Abstract

ABSTRACT

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.