Impact of Asian and Global Crises on Indonesian Exports

Abstract

This study was conducted to compare the impact of the Asian and Global crises on Indonesian export using augmented gravity model with New Trade Theory framework. Using quarterly data from 1993-2012, export is classified into three main sectors (agriculture, manufacture, mining-quarrying) and aggregate sector. Top 30 countries of Indonesian trading partner are chosen as sample, which represent 88 percent of total Indonesian export. Panel estimation method employs Fixed Effect Model AR (1) as the best method among OLS and REM. In addition, to enrich the analysis, this study also describes all the information about export situation during crisis through descriptive analysis. According to our descriptive analysis, the Asian crisis gives negative effects on export value in all sectors, based on export value growth calculation on the crisis period to the same period in the previous year. Primary sector is the most sensitive sector in term of export value. The panel gravity model composed by lagged Indonesian export, total GDP of Indonesia and trading partner, Relative Factor Endowment, Real Exchange Rate, distance, Regional Trade Agreement, language, and crisis dummy. The model has proved a strongly negative relation between the Asian crisis and export value on each sector except the aggregate sector. This result was supported by the descriptive analysis, where export is more sensitive during the Asian crisis. From the estimation results of each sector, mining sector is suffering from the worst effects of the Asian crisis.