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Monetary Policy and Trade Balance in Indonesia: Evidence from a Structural VAR Analysis

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  • Lestano

Abstract

This paper investigates the response of the trade balance to monetary policy innovations for the Indonesia economy using a Structural Vector Auto Regressive (SVAR) model. We estimate three type of SVAR models using monthly data, that is, for full sample (1980:M1 until 2005:M3), p re- (1980:M1-1997:M6), and post-Asian crisis periods (1998:M1-2005:M3). The aim of splitting full sample size is to take into account a sensibility of structural break due to the onset of Asian financial crisis in 1997-1998. The dynamic properties of the model are discussed and monetary policy shocks identified by means of various impulse responses and a variance decomposition.

Suggested Citation

  • Lestano, 2009. "Monetary Policy and Trade Balance in Indonesia: Evidence from a Structural VAR Analysis," Economics and Finance in Indonesia, Faculty of Economics and Business, University of Indonesia, vol. 57, pages 181-202, August.
    • Handle: RePEc:lpe:efijnl:200909
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    More about this item

    Keywords

    Monetary Policy; Exchange Rate; Trade Balance; Structural VAR; Indonesia;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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