Trade openness, real exchange rate, gross domestic investment and growth in Indonesia

This study examines the relationships among economic growth, domestic investment, real exchange rate and trade openness in Indonesia using the Johansen cointegration test and Granger causality test. The results suggest that there exists a long-run relationship among the variables. All the estimated...

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Main Author:	Yusoff, Mohammed
Format:	Article
Language:	English
Published:	Sage Publications 2014
Subjects:	HF3000 By region or country
Online Access:	http://irep.iium.edu.my/35307/ http://irep.iium.edu.my/35307/ http://irep.iium.edu.my/35307/1/Trade_Openness%2C_Real_Exchange_Rate%2C_Gross_Domestic_Investment_and_Growth_in_Indonesia.pdf

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recordtype	eprints
spelling	iium-353072018-06-20T07:33:12Z http://irep.iium.edu.my/35307/ Trade openness, real exchange rate, gross domestic investment and growth in Indonesia Yusoff, Mohammed HF3000 By region or country This study examines the relationships among economic growth, domestic investment, real exchange rate and trade openness in Indonesia using the Johansen cointegration test and Granger causality test. The results suggest that there exists a long-run relationship among the variables. All the estimated coefficients of the long-run equation have the correct positive signs and significant at least at the 5 per cent level. Specifically, in the long run, a 1 per cent increase in trade openness leads to about 26.5 per cent increase in Indonesian real GDP, a 1 per cent increase in domestic investment will spur real GDP by 1.8 per cent, and a 1 per cent depreciation of the rupiah raises real GDP by about 6.4 per cent. The results from the Granger causality test suggest that all the variables affect real GDP in the short run. Both trade openness and gross domestic investment cause growth unidirectionally in the short run, but feedback occurs between growth and the real exchange rate. The evidences suggest that trade openness, gross domestic investment and the exchange rate are important determinants of economic growth and therefore policy makers should seriously take these variables into account in their policy construct in order to achieve sustained economic growth in Indonesia. Specifically, Indonesia should liberalise foreign trade, improve the domestic investment climate and maintain exchange rate stability. Sage Publications 2014-02 Article PeerReviewed application/pdf en http://irep.iium.edu.my/35307/1/Trade_Openness%2C_Real_Exchange_Rate%2C_Gross_Domestic_Investment_and_Growth_in_Indonesia.pdf Yusoff, Mohammed (2014) Trade openness, real exchange rate, gross domestic investment and growth in Indonesia. Margin: The Journal of Applied Economic Research , 8 (1). pp. 1-13. ISSN 0973-8029 http://mar.sagepub.com/content/8/1/1.refs
repository_type	Digital Repository
institution_category	Local University
institution	International Islamic University Malaysia
building	IIUM Repository
collection	Online Access
language	English
topic	HF3000 By region or country
spellingShingle	HF3000 By region or country Yusoff, Mohammed Trade openness, real exchange rate, gross domestic investment and growth in Indonesia
description	This study examines the relationships among economic growth, domestic investment, real exchange rate and trade openness in Indonesia using the Johansen cointegration test and Granger causality test. The results suggest that there exists a long-run relationship among the variables. All the estimated coefficients of the long-run equation have the correct positive signs and significant at least at the 5 per cent level. Specifically, in the long run, a 1 per cent increase in trade openness leads to about 26.5 per cent increase in Indonesian real GDP, a 1 per cent increase in domestic investment will spur real GDP by 1.8 per cent, and a 1 per cent depreciation of the rupiah raises real GDP by about 6.4 per cent. The results from the Granger causality test suggest that all the variables affect real GDP in the short run. Both trade openness and gross domestic investment cause growth unidirectionally in the short run, but feedback occurs between growth and the real exchange rate. The evidences suggest that trade openness, gross domestic investment and the exchange rate are important determinants of economic growth and therefore policy makers should seriously take these variables into account in their policy construct in order to achieve sustained economic growth in Indonesia. Specifically, Indonesia should liberalise foreign trade, improve the domestic investment climate and maintain exchange rate stability.
format	Article
author	Yusoff, Mohammed
author_facet	Yusoff, Mohammed
author_sort	Yusoff, Mohammed
title	Trade openness, real exchange rate, gross domestic investment and growth in Indonesia
title_short	Trade openness, real exchange rate, gross domestic investment and growth in Indonesia
title_full	Trade openness, real exchange rate, gross domestic investment and growth in Indonesia
title_fullStr	Trade openness, real exchange rate, gross domestic investment and growth in Indonesia
title_full_unstemmed	Trade openness, real exchange rate, gross domestic investment and growth in Indonesia
title_sort	trade openness, real exchange rate, gross domestic investment and growth in indonesia
publisher	Sage Publications
publishDate	2014
url	http://irep.iium.edu.my/35307/ http://irep.iium.edu.my/35307/ http://irep.iium.edu.my/35307/1/Trade_Openness%2C_Real_Exchange_Rate%2C_Gross_Domestic_Investment_and_Growth_in_Indonesia.pdf
first_indexed	2023-09-18T20:50:38Z
last_indexed	2023-09-18T20:50:38Z
_version_	1777409970568953856

Trade openness, real exchange rate, gross domestic investment and growth in Indonesia

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