The effects of trade and exchange rate policies of Indonesian agricultural exports
Date
1990-05
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Abstract
Using price effects analysis, the study shows empirically the effects of trade and exchange rate policies on incentives to agricultural export production. Empirical analysis is based on the analytical model used by Bautista (1987a).
In general, this study finds that, to some extent, trade and exchange rate policies influence agricultural incentives. Using Indonesian annual data from 1960-1988, it is shown that the dominant sources of price bias against agricultural exports are trade policies, especially between 1867 and 1975 and more so in the early 1980s. Depreciation of domestic currency in order to offset the price bias was not successtu1ly implemented especially in the late 1970 and early 1980s the ambivalent effects of direct restriction to the export of traditional raw materials and the price of home goods increased faster than the original intention of the government which was to promote non-oil exports. Only the terms of trade movement had dominant influences on the real exchange rate overvaluation different from that of the hypothetical rate ( that is, unbiased trade policies when implicit tariff and implicit export tax are zero).