2.4 Relationship between Foreign Shocks and Export
With the increased of globalization trend, each country depend heavily on another countries. The effects of foreign shocks from main trading partners are significant impacts on own country’s economy activities either in positive way or negative way. According to Ibrahim (2003) that this issue can be explored through two mechanisms such as business cycle transmission, and International trade and capital flows. Ibrahim had estimated industrial production (IP) growth, consumer price index (CPI), M2 growth, exchange rate, Malaysia T-bill and US federal fund rates over the monthly data of January 1977 to August 1998 in both Malaysia and the US. He used ADF unit root test and PP unit root test, Johansen …show more content…
They found variability output of US and Japan had strongly and significantly impact on the Australian business cycle. However, US business cycle has larger impacts compare to Japanese business cycle on the Australian business cycle especially the financial market of …show more content…
There were three cointegrating relationships between the variables at 1% significance level under multivariate cointegration analysis. The ECT’s result also shows the existence long run relationship between variables. Based on the findings of impulse-response functions, effects of US’s consumer price index is positively towards Indonesia’s consumer price index but negatively on Indonesian inflation, interest rate and industrial production (Munadi & Safa, 2005). In short run, the US’s interest rate shocks is response to Indonesian interest rate adversely while shocks in US’s consumer price index, inflation rate, and industrial production affect Indonesian interest rate positively. Besides, industrial production and interest rate shocks of US in short run influence Indonesian industrial production negatively, meanwhile consumer price index and inflation rate shocks of US had affected Indonesian industrial production index positively. Munadi and Safa concluded that US driven Indonesia business cycle does not appear in their
With the increased of globalization trend, each country depend heavily on another countries. The effects of foreign shocks from main trading partners are significant impacts on own country’s economy activities either in positive way or negative way. According to Ibrahim (2003) that this issue can be explored through two mechanisms such as business cycle transmission, and International trade and capital flows. Ibrahim had estimated industrial production (IP) growth, consumer price index (CPI), M2 growth, exchange rate, Malaysia T-bill and US federal fund rates over the monthly data of January 1977 to August 1998 in both Malaysia and the US. He used ADF unit root test and PP unit root test, Johansen …show more content…
They found variability output of US and Japan had strongly and significantly impact on the Australian business cycle. However, US business cycle has larger impacts compare to Japanese business cycle on the Australian business cycle especially the financial market of …show more content…
There were three cointegrating relationships between the variables at 1% significance level under multivariate cointegration analysis. The ECT’s result also shows the existence long run relationship between variables. Based on the findings of impulse-response functions, effects of US’s consumer price index is positively towards Indonesia’s consumer price index but negatively on Indonesian inflation, interest rate and industrial production (Munadi & Safa, 2005). In short run, the US’s interest rate shocks is response to Indonesian interest rate adversely while shocks in US’s consumer price index, inflation rate, and industrial production affect Indonesian interest rate positively. Besides, industrial production and interest rate shocks of US in short run influence Indonesian industrial production negatively, meanwhile consumer price index and inflation rate shocks of US had affected Indonesian industrial production index positively. Munadi and Safa concluded that US driven Indonesia business cycle does not appear in their