The Openness and Its Impact to Indonesian Economy: A Structural VAR Approach

Iskandar Simorangkir ()
Additional contact information
Iskandar Simorangkir: Bank Indonesia

Bulletin of Monetary Economics and Banking, 2008, vol. 10, issue 3, 223-260

Abstract: There have been long running disputes on the relationship between the degree of openness and economic performance. Based on cross-country analyses, a number of studies found that the relationship between openness and economic performance is quite mixed. Some studies discovered a positive relationship, while others found a negative or simply neutral relationship. Unlike previous studies using cross-sectional data, this study uses structural vector auto-regression (SVAR) to explore the impact of trade openness and financial openness on the Indonesian economy. The findings shows that trade openness and financial openness have negative impacts on output. The results of trade openness are quite robust; since a lack of preparation to anticipate trade openness weakens the competitiveness of Indonesian products relative to foreign products and, finally, lower output. The findings of financial openness are also robust because greater financial openness leaves the Indonesian economy more vulnerable to capital reversal, which endangers economic performance.

Keywords: Openness; SVAR; forecast error variance decomposition; impulse response function (search for similar items in EconPapers)
JEL-codes: F41 F43 (search for similar items in EconPapers)
Date: 2008
References: Add references at CitEc
Citations:

Downloads: (external link)
https://bulletin.bmeb-bi.org/cgi/viewcontent.cgi?article=1398&context=bmeb (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:idn:journl:v:10:y:2008:i:3b:p:223-260

DOI: 10.21098/bemp.v10i3.227

Access Statistics for this article

Bulletin of Monetary Economics and Banking is currently edited by Paresh Narayan

More articles in Bulletin of Monetary Economics and Banking from Bank Indonesia Contact information at EDIRC.
Bibliographic data for series maintained by Lutzardo Tobing ( this e-mail address is bad, please contact ) and Jimmy Kathon ().