Proceedings of the 3rd Economics and Business International Conference, EBIC 2022, 22 September 2022, Medan, North Sumatera, Indonesia

Research Article

An Analysis Of Non-Migas Sector Trade Balance For Indonesia’s Largest Trading Partner: Autoregressive Distributed Lag Approach

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  • @INPROCEEDINGS{10.4108/eai.22-9-2022.2337482,
        author={Nancy  Nopeline and Sirojuzilam  Sirojuzilam and M.  Syafii and Ahmad Albar Tanjung},
        title={An Analysis Of Non-Migas Sector Trade Balance For Indonesia’s Largest Trading Partner: Autoregressive Distributed Lag Approach},
        proceedings={Proceedings of the 3rd Economics and Business International Conference, EBIC 2022, 22 September 2022, Medan, North Sumatera, Indonesia},
        publisher={EAI},
        proceedings_a={EBIC},
        year={2024},
        month={4},
        keywords={j-curve exchange rate balance of trade ardl},
        doi={10.4108/eai.22-9-2022.2337482}
    }
    
  • Nancy Nopeline
    Sirojuzilam Sirojuzilam
    M. Syafii
    Ahmad Albar Tanjung
    Year: 2024
    An Analysis Of Non-Migas Sector Trade Balance For Indonesia’s Largest Trading Partner: Autoregressive Distributed Lag Approach
    EBIC
    EAI
    DOI: 10.4108/eai.22-9-2022.2337482
Nancy Nopeline1,*, Sirojuzilam Sirojuzilam1, M. Syafii1, Ahmad Albar Tanjung2
  • 1: Universitas Sumatera Utara
  • 2: Sekolah Tinggi Ilmu Manajemen Sukma
*Contact email: sitompulnancy84@gmail.com

Abstract

In this work, we examine the monthly impact of the real effective exchange rate (REER) on the bilateral trade balance between Indonesia and its six major trading partners (Japan, China, the United States, and Europe) from 2005 to 2021. The method of autoregressive distributed lag (ARDL) is used in this investigation. This research aims to explain why and how Indonesia's trade balance has improved after the J curve was first demonstrated there. As a result of this study, the J curve was developed to help fix the trade deficit. The bilateral trade balance between Indonesia and China exhibits a J curve phenomena in the short run. Since a J curve is correlated with the characteristics of the trade, this proves that it is a head-to-head phenomena. Therefore, trade characteristics should be taken into account by the mechanism for correcting the trade balance in reaction to the exchange rate shock (i.e. intervention in the exchange rate market).