Using Indonesia's Real Exchange Rate to Test Ricardian Equivalence

Yoopi Abimanyu

International Economic Journal, 1998, vol. 12, issue 3, 17-29

Abstract: Using Indonesia as a study case, this paper analyzes the relationship between the actual real exchange rate, the equilibrium real exchange rate, and other macroeconomic variables. The estimate shows that, out of nine explanatory independent variables, only government consumption and the fiscal deficit have significant effects on the real exchange rate variable. Increases in both government consumption and the fiscal deficit appreciate the real exchange rate. This finding rejects Ricardian equivalence. [E62, F41, O53].

Date: 1998
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DOI: 10.1080/10168739800000026

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