Business Cycle Transmission between the UAS and Indonesia: A Vector Error Correction Model

Munadi, Ernawati (2005) Business Cycle Transmission between the UAS and Indonesia: A Vector Error Correction Model. MPRA Munich Personal RePEc Archive.

Text 2. Business Cycle Transmission.pdf Download (316kB)

Abstract

There are several mechanisms that can account for short-run business cycle transmission. International trade is probably the major vehicle, and it forms a direct channel through which income and price shocks may be transmitted. Capital flows provide a second mechanism which is most likely to be responsible for the transmission of interest rate, monetary and exchange rate shocks. The study attempted to focus on the income shocks transmitted between a developed country and a developing country such as the USA and Indonesia. The transmission of industrial production, prices and interest rate shocks between the two countries have been examined along with an objective to test this proposition focusing on Indonesia. The study also considered the USA-Indonesia proposition by estimating a vector error correction model. The findings of the study show that there is no co-integration between U.S. and Indonesian industrial production. Therefore it does not appear that the USA drives Indonesian business cycle fluctuations and vice versa. Keyword: Business cycle; co-integration; error correction model, business transmission

Item Type:	Other
Subjects:	S Agriculture > S Agriculture (General)
Divisions:	Faculty of Agriculture > Agribusiness Study Program
Depositing User:	Sulimin BP3
Date Deposited:	19 Sep 2019 04:04
Last Modified:	19 Sep 2019 04:04
URI:	http://erepository.uwks.ac.id/id/eprint/4926

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