Business cycle transmission between the USA and Indonesia: A vector error correction modelErnawati Munadi and Dr. Mohammad Samaun Safa () MPRA Paper from University Library of Munich, Germany Abstract: There are several mechanisms that can account for short-run business cycle transmission. International trade is probably the major vehicle, and it forms a direct channel through which income and price shocks may be transmitted. Capital flows provide a second mechanism which is most likely to be responsible for the transmission of interest rate, monetary and exchange rate shocks. The study attempted to focus on the income shocks transmitted between a developed country and a developing country such as the USA and Indonesia. The transmission of industrial production, prices and interest rate shocks between the two countries have been examined along with an objective to test this proposition focusing on Indonesia. The study also considered the USA-Indonesia proposition by estimating a vector error correction model. The findings of the study show that there is no co-integration between U.S. and Indonesian industrial production. Therefore it does not appear that the USA drives Indonesian business cycle fluctuations and vice versa. Keywords: Business cycle; co-integration; error correction model; business transmission (search for similar items in EconPapers) Published in International Journal of Management and Entrepreneurship 2.1(2005): pp. 96-111 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: http://EconPapers.repec.org/RePEc:pra:mprapa:10755 Access Statistics for this paper More papers in MPRA Paper from University Library of Munich, Germany |
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