Growth Slowdown Analysis for Indonesia’s Subnational Economies: An Empirical Investigation

Tan Khee Giap, Sasidaran Gopalan and Nursyahida Ahmad ()
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Tan Khee Giap: Asia Competitiveness Institute, Lee Kuan Yew School of Public Policy, National University of Singapore, 18 Evans Road, Singapore 259364, Singapore
Nursyahida Ahmad: Asia Competitiveness Institute, Lee Kuan Yew School of Public Policy, National University of Singapore, 18 Evans Road, Singapore 259364, Singapore

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2018, vol. 21, issue 03, 1-36

Abstract: Despite the positive growth performance of Indonesia over the past two decades, concerns have been expressed about whether the country would be caught in a middle-income trap. This paper offers a systematic analysis on growth slowdown for the Indonesian provinces, against the backdrop of other developing Asian economies including the ASEAN economies, Greater China economies and the Indian sub-national economies. Provincial-level analysis for Indonesia is appropriate given the size and great variations in the levels of development of the Indonesian provinces. By employing a logistic regression as well as Bayesian Model Averaging techniques, we ascertain the determinants of growth slowdown in Indonesian sub-national economies. Having identified the underlying drivers of growth slowdown in each income group, we also assess the predictive probability of each sub-national economy in Indonesia experiencing growth slowdown in the near future. Overall, we find that the Indonesian sub-national economies have a 10% chance of experiencing growth slowdown in the 2012–2017 period on average which is lower than the average predictive probabilities for Greater China and India sub-national economies.

Keywords: Bayesian model averaging; logistic regression; Indonesia; growth slowdown (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1142/S0219091518500170

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