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Using Indonesia's Real Exchange Rate to Test Ricardian Equivalence

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  • Yoopi Abimanyu

Abstract

Using Indonesia as a study case, this paper analyzes the relationship between the actual real exchange rate, the equilibrium real exchange rate, and other macroeconomic variables. The estimate shows that, out of nine explanatory independent variables, only government consumption and the fiscal deficit have significant effects on the real exchange rate variable. Increases in both government consumption and the fiscal deficit appreciate the real exchange rate. This finding rejects Ricardian equivalence. [E62, F41, O53].

Suggested Citation

  • Yoopi Abimanyu, 1998. "Using Indonesia's Real Exchange Rate to Test Ricardian Equivalence," International Economic Journal, Taylor & Francis Journals, vol. 12(3), pages 17-29.
    • Handle: RePEc:taf:intecj:v:12:y:1998:i:3:p:17-29
    DOI: 10.1080/10168739800000026
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    Cited by:

    1. Haryo Kuncoro, 2018. "The impact of government consumption on the private expenditures in developing country: the case of Indonesia," Business and Economic Horizons (BEH), Prague Development Center, vol. 14(1), pages 1-16, January.
    2. Dalia Ibrahim Mustafa & Ghazi Ibrahim Al-Assaf, 2022. "The Asymmetric Effects of the Determinants of Real Exchange Rate in Jordan: ‎The Role of Price Index Selection," Review of Applied Socio-Economic Research, Pro Global Science Association, vol. 24(2), pages 121-139, December.
    3. Muhammad Waqas & Masood Sarwar Awan, 2012. "Exchange Rate, Interest Rate and Ricardian Equivalence Evidence from Pakistan," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 0(SS), pages 249-269.
    4. Waqas, Muhamad & Awan, Masood Sarwar & Aslam, Muhammad Amir, 2011. "We are living on the cost of our children," MPRA Paper 32044, University Library of Munich, Germany.

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