Browsing by Author "Indrawari"
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Item Restricted Exchange rates, oil prices, and fiscal deficits in Indonesia: 1967-1990(1994-01) Indrawari; de Dios, Emmanuel S.The short-run consequences of a commodity export boom can differ greatly between developing and developed countries because of differences in the structure of financial markets and the operation of monetary policy. A model with assumptions appropriate for developing countries has been previously outlined by Edwards [1986] and applied to the Colombian experience of a coffee price boom. On the real side, the theoretical structure incorporates the spending effect of a price-based commodity export boom, which tends to raise demand for home goods. On the monetary side, the boom leads to a balance of payments surplus an increase in international reserves. If the increase in reserves is not fully sterilized, the monetary base increases, and inflation tends accelerate. If this money-creation effect of the export boom is large enough, the currency appreciates in real terms. Using Edwards' [1986] model, this paper shows the relationship between the oil sector, money, inflation, the real exchange rate, and the fiscal deficit in Indonesia for the period 1967-90. The results presented tend to confirm some of the main predictions of the model. In particular, these results indicate that higher oil prices have been closely related to greater money creation and inflation. Higher oil prices are linked to currency appreciation. This process of currency appreciation on the other hand, reduces the fiscal deficit. The hypothesis that links the price of oil, the rate of growth of money, the fiscal deficit, and the exchange rate, is confirmed. It is shown that a model that explicitly accounts for the effects of the other variables on the fiscal deficit is superior to one that merely regards the deficit as exogenous.Item Restricted Foreign direct investment and exports: complements or substitutes?(2009-07) Indrawari; de Dios, Emmanuel S.