Post-GFC External Shocks and Indonesian Economic Performance

41 Pages Posted: 12 Sep 2016

See all articles by Prayudhi Azwar

Prayudhi Azwar

The University of Western Australia - UWA Business School; Bank Indonesia

Rod Tyers

Australian National University (ANU) - School of Economics; The University of Western Australia - Department of Economics

Date Written: September 8, 2016

Abstract

The post-GFC era sees slower global growth and a substantial Chinese slowdown, unusually combined with lower investment financing costs, and with the eventual prospect of a US-led re-tightening of global financial markets. For Indonesia in the medium term, these developments imply a slowing of export growth and a temporary surge in net inward investment incentives. These changes are examined here using a numerical macro model. The results suggest that recent fiscal reform is long-run beneficial and that it will moderate the negative effects of expectations linked to these global events, the formation of which is shown to be an important determinant of performance. Finally, a sensitivity analysis is conducted, mainly on parameters indicating Indonesian openness to trade and finance. Liberal product markets and home investment are shown to offer unambiguous gains in the face of negative external shocks, while openness to external financial flows does not.

Keywords: Indonesia, External Shocks, Exchange Rates, Macroeconomic Policy

JEL Classification: E37, E44, E47, E65, F47, N15

Suggested Citation

Azwar, Prayudhi and Tyers, Rod, Post-GFC External Shocks and Indonesian Economic Performance (September 8, 2016). CAMA Working Paper No. 58/2016 . Available at SSRN: https://ssrn.com/abstract=2836766 or http://dx.doi.org/10.2139/ssrn.2836766

Prayudhi Azwar

The University of Western Australia - UWA Business School ( email )

Crawley, Western Australia 6009
Australia

Bank Indonesia ( email )

JL. M.H. Thamrin No. 2
Jakarta, 10350
Indonesia

HOME PAGE: http://www.bi.go.id

Rod Tyers (Contact Author)

Australian National University (ANU) - School of Economics ( email )

Arndt Building
Australian National University
Canberra, Australian Capital Territory 0200
Australia
61-6-249-5124 (Fax)

The University of Western Australia - Department of Economics ( email )

35 Stirling Highway
Crawley, Western Australia 6009
Australia
61 8 6488 5632 (Phone)

HOME PAGE: http://www.business.uwa.edu.au/school/staff-profiles?type=profile&dn=cn%3DRodney%20Tyers%2Cou%3DEcon

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