Determinants And Sustainability Of Indonesia's Current Account Balance

Sahminan Sahminan, Ibrahim and Yanfitri
Additional contact information
Ibrahim: Bank Indonesia
Yanfitri: Bank Indonesia

No WP/9/2009, Working Papers from Bank Indonesia

Abstract: This paper examines dynamics of Indonesia's current account, factors determining the dynamics of the current account, and sustainability of the current account over the period of 1994-2008. The estimation results show a number of findings. First, the dynamics of actual current account in Indonesia was very much in line with the optimal current account based on intertemporal approach. In other words, the level and movement of actual current account were consistent with the level and movement of optimal current account. Second, consumption, investment, and real effective exchange rate significantly influenced the movements of Indonesia's current account. On the other hand, GDP growth, government budget and other external factors did not have a significant effect on the current account. Third, excessive consumption or investment, as well as the appreciation of the rupiah real exchange rate potentially result in unsustainable current account.

Keywords: Current Account; Intertemporal Model; Indonesia (search for similar items in EconPapers)
JEL-codes: D9 F32 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2009
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Citations: View citations in EconPapers (1)

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