The Journal of Asian Finance, Economics and Business Vol.5 No.2 pp.25-33

DOI : https://doi.org/10.13106/jafeb.2018.vol5.no2.25
 
Authors :
Rudi Purwono 1 , Karima Mucha 2 , M. Khoerul Mubin 3
1 First Author, UNAIR Faculty of Economics and Business, Universitas Airlangga , Indonesia. E-mail: This email address is being protected from spambots. You need Javascript enabled to view it.
2 UNAIR Faculty of Economics and Business, Universitas Airlangga , Indonesia. E-mail: This email address is being protected from spambots. You need Javascript enabled to view it.
3 Corresponding Author, UNAIR Faculty of Economics and Business, Universitas Airlangga , Indonesia [Postal Address: UNAIR Faculty of Economics and Business, Universitas Airlangga , Jalan Airlangga No. 4, Airlangga, Gubeng, Surabaya, 60286, Indonesia] Email: This email address is being protected from spambots. You need Javascript enabled to view it.
 
Abstract:
In the globalization and free trade era, the current account deficit problem is a common phenomenon experienced by most countries, both developing and developing countries. Also with managed floating regime of exchange rate, it becomes very important to analyze the dynamics of current account balance which determines the trade. The deficit condition has lasted for four years in Indonesia, as well as the deficit value above the value of the surplus that has been experienced during the period 2005-2011. This study is firstly aimed at examining the condition of the deficit which occurs in the export and import, manufactured goods and oil and gas, whether related to the transaction of goods and services. We try to build a predicted model which is close to the actual. Then, the focuses examines an exchange rate volatility impact on current account deficit. The model used in this research is a simultaneous model of Indonesia current account deficit from 2005 to 2014. The simulation result indicated that depreciation increases surplus to current account deficit. The decrease of export manufactured goods (non oil and gas) is higher than the increase of imports. For the oil and gas sector, depreciation of the rupiah against the US dollar results in an increased burden of higher oil and gas imports due to import transactions.
 
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