The Role of Monetary Policy in Comparative Advantage and Trade Balance of Capital Intensive Industry in Indonesia
This paper examines the influence of monetary policy on comparative advantage and trade balance of capital-intensive industries (technology-intensive industry and human capital-intensive industry). Ever since Indonesia implemented the Inflation Targeting Framework (ITF) in 2005, the average interest...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
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Russian Academy of Sciences, Institute of Economics of the Ural Branch
2020-03-01
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| Series: | Экономика региона |
| Subjects: | |
| Online Access: | https://www.economyofregion.com/data/jarticles/3263.pdf |
| _version_ | 1797725003481874432 |
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| author | Chandra Utama Ruth Meilianna |
| author_facet | Chandra Utama Ruth Meilianna |
| author_sort | Chandra Utama |
| collection | DOAJ |
| description | This paper examines the influence of monetary policy on comparative advantage and trade balance of capital-intensive industries (technology-intensive industry and human capital-intensive industry). Ever since Indonesia implemented the Inflation Targeting Framework (ITF) in 2005, the average interest rates have been gradually declining, making capital more affordable. The Heckscher-Ohlin-Samuelson (HOS) model states that lower interest rates will improve comparative advantage and trade balance of capital-intensive industry. In our research we used annual export and import data for the period from 2000 to 2017, drawing on the three-digit Standard International Trade Classification (SITC) revision 2 from United Nations Commodity Trade Statistics Database (UN-COMTRADE). The study combines Revealed Symmetric Comparative Advantage (RSCA) and Trade Balance Index (TBI), used for analysing Product Mapping. Additionally, we applied the Difference in Differences (DD) model to measure the real impact of the ITF on capital-intensive industries choosing unskilled labour-intensive products as a control group. For analysing the effect of the ITF on probability of positive changes of comparative advantage and trade balance we used the Logit model. Based on product mappings, we cannot conclude that the situation for capital-intensive products is better in 2014 than in 2000, pre-ITF. However, the DD and the Logit model show that the ITF positively influences comparative advantage and trade balance of capital-intensive products and significantly impacts trade balance of un-skilled labour-intensive products. The study concludes that the ITF have positive impact on comparative ad-vantage and trade balance of capital-intensive industry in Indonesia. |
| first_indexed | 2024-03-12T10:24:58Z |
| format | Article |
| id | doaj.art-c466fdd58ff1454b9dd1146a7e61c3d0 |
| institution | Directory Open Access Journal |
| issn | 2072-6414 2411-1406 |
| language | English |
| last_indexed | 2024-03-12T10:24:58Z |
| publishDate | 2020-03-01 |
| publisher | Russian Academy of Sciences, Institute of Economics of the Ural Branch |
| record_format | Article |
| series | Экономика региона |
| spelling | doaj.art-c466fdd58ff1454b9dd1146a7e61c3d02023-09-02T09:50:07ZengRussian Academy of Sciences, Institute of Economics of the Ural BranchЭкономика региона2072-64142411-14062020-03-01161298309https://doi.org/10.17059/2020-1-22The Role of Monetary Policy in Comparative Advantage and Trade Balance of Capital Intensive Industry in IndonesiaChandra Utama 0Ruth Meilianna1Universitas Katolik Parahyangan — IndonesiaLembaga Ilmu Pengetahuan IndonesiaThis paper examines the influence of monetary policy on comparative advantage and trade balance of capital-intensive industries (technology-intensive industry and human capital-intensive industry). Ever since Indonesia implemented the Inflation Targeting Framework (ITF) in 2005, the average interest rates have been gradually declining, making capital more affordable. The Heckscher-Ohlin-Samuelson (HOS) model states that lower interest rates will improve comparative advantage and trade balance of capital-intensive industry. In our research we used annual export and import data for the period from 2000 to 2017, drawing on the three-digit Standard International Trade Classification (SITC) revision 2 from United Nations Commodity Trade Statistics Database (UN-COMTRADE). The study combines Revealed Symmetric Comparative Advantage (RSCA) and Trade Balance Index (TBI), used for analysing Product Mapping. Additionally, we applied the Difference in Differences (DD) model to measure the real impact of the ITF on capital-intensive industries choosing unskilled labour-intensive products as a control group. For analysing the effect of the ITF on probability of positive changes of comparative advantage and trade balance we used the Logit model. Based on product mappings, we cannot conclude that the situation for capital-intensive products is better in 2014 than in 2000, pre-ITF. However, the DD and the Logit model show that the ITF positively influences comparative advantage and trade balance of capital-intensive products and significantly impacts trade balance of un-skilled labour-intensive products. The study concludes that the ITF have positive impact on comparative ad-vantage and trade balance of capital-intensive industry in Indonesia.https://www.economyofregion.com/data/jarticles/3263.pdfcapital-intensive industrymonetary policyinterest ratesinflation targetinginternational tradeexportcomparative advantagetrade balanceindonesiadifference in differences |
| spellingShingle | Chandra Utama Ruth Meilianna The Role of Monetary Policy in Comparative Advantage and Trade Balance of Capital Intensive Industry in Indonesia Экономика региона capital-intensive industry monetary policy interest rates inflation targeting international trade export comparative advantage trade balance indonesia difference in differences |
| title | The Role of Monetary Policy in Comparative Advantage and Trade Balance of Capital Intensive Industry in Indonesia |
| title_full | The Role of Monetary Policy in Comparative Advantage and Trade Balance of Capital Intensive Industry in Indonesia |
| title_fullStr | The Role of Monetary Policy in Comparative Advantage and Trade Balance of Capital Intensive Industry in Indonesia |
| title_full_unstemmed | The Role of Monetary Policy in Comparative Advantage and Trade Balance of Capital Intensive Industry in Indonesia |
| title_short | The Role of Monetary Policy in Comparative Advantage and Trade Balance of Capital Intensive Industry in Indonesia |
| title_sort | role of monetary policy in comparative advantage and trade balance of capital intensive industry in indonesia |
| topic | capital-intensive industry monetary policy interest rates inflation targeting international trade export comparative advantage trade balance indonesia difference in differences |
| url | https://www.economyofregion.com/data/jarticles/3263.pdf |
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