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Is ACFTA A Proper Strategy Of Sustainable Poverty Alleviation?: Proof From The Depletion Of Saving Rate

Author

Listed:
  • Bagus Arya Wirapati

    (Bank Indonesia)

  • Niken Astria Sakina Kusumawardhani

    (Bank Indonesia)

Abstract

The outcome of Regional Free Trade Area (R-FTA) still remains a conundrum. Regional free trade area (R-FTA) is one of the manifestations of the economy integration phenomenon. R-FTA brings many pros and cons to the economists. It allows better allocation of resources especially by eliminating tariffs, thus making people have higher purchasing power for goods. While the increase of purchasing power is good for growth engine and poverty alleviation progress, this paper proves that there is potency for the agreement to be detrimental in the long run. The main focus in this paper is the potential impact of ACFTA to the saving rate as the shock buffer for the poor in time of recessions and crises, where purchasing power decreases significantly. We download the ACFTA impact through the series of net import, defined as the difference between imports from export. We use Dynamic Panel Data (DPD) to estimate the impact of net import to the saving rate, assuming that there is a dynamic relationship between saving rate and its lagged value. The estimation result proves that there is a negative relationship between import and the saving per capita, which indicates the consumptive behavior of ASEAN people under high import. Moreover, the dynamic relationship shows that saving per capita is not persistent, meaning that the saving rate will be decreased gradually. Therefore, we can expect that in the long rung, the savings will be depleted into nothing if we keep letting the import flooded domestic market without imposing any pre-emptive and reactive policies. This paper provides a set of historical estimation of the potential impact of ACFTA on saving rate and its policy implication to endure the impact.

Suggested Citation

  • Bagus Arya Wirapati & Niken Astria Sakina Kusumawardhani, 2010. "Is ACFTA A Proper Strategy Of Sustainable Poverty Alleviation?: Proof From The Depletion Of Saving Rate," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 13(1), pages 75-102, July.
    • Handle: RePEc:idn:journl:v:13:y:2010:i:1g:p:75-102
    DOI: https://doi.org/10.21098/bemp.v13i1.385
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    References listed on IDEAS

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    More about this item

    Keywords

    Free Trade; Poverty Alleviation; Saving Behavior;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration

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