Open AccessThe Determinants of Indonesia’s Business Cycle
Author(s) -
Berry A. Harahap,
Pakasa Bary,
Anggita Cinditya M. Kusuma
Publication year - 2020
Publication title -
journal of central banking theory and practice
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.269
H-Index - 8
eISSN - 2336-9205
pISSN - 1800-9581
DOI - 10.2478/jcbtp-2020-0029
Subject(s) - business cycle , spillover effect , indonesian , market liquidity , economics , vector autoregression , monetary economics , structural vector autoregression , autoregressive model , monetary policy , macroeconomics , international economics , econometrics , linguistics , philosophy
This study investigates the determinants of Indonesian’s business cycle using the global vector autoregressive (GVAR) approach, by including spillover responses within 33 countries with 2000 bootstrap replications. The results show that Indonesia’s business cycle is influenced by both domestic and external factors. In addition to exogenous shocks from output, the dominant domestic factors are monetary policy and price competitiveness. The dominant external factors are global economic activity and liquidity conditions, particularly those originating from the Chinese economy. Spillovers from a number of economies appear to shape Indonesia’s economic fluctuations. The paper discusses such relevant spillovers.