The Dynamic Impact of Trade Openness on Poverty: An Empirical Study of Indonesia's Economy

Lestari Agusalim
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Lestari Agusalim: Department of Economic Development, Faculty of Economics Business and Humanities, Trilogi University, Jakarta, Indonesia.

International Journal of Economics and Financial Issues, 2017, vol. 7, issue 1, 566-574

Abstract: This research aims to analyze the dynamic impact of international trade openness on poverty in Indonesia. Previous research shows different effects in every country. The data used are export import value, gross domestic product, income per capita, open unemployment rate (OUR), and poverty rate (POVR) during 1978-2015. Vector error correction model analysis shows that in short run, trade openness does not have any significant impact on poverty. However, in long run, it has significant impact in reducing poverty. Impulse respond function analysis concludes that POVR gave a positive response in the first 2 years, but negative in the third to every trade openness variable shock. Poverty rate shows the biggest negative response in the fifth year. According to forecast error variance decomposition analysis, trade openness does not give big contribution in affecting POVR during the first 3 years, but starts to show effect in the following seven, with the biggest in the ninth year.

Keywords: Trade Openness; Poverty; Vector Error Correction Model (search for similar items in EconPapers)
JEL-codes: C10 F14 I32 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eco:journ1:2017-01-71

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