Indonesia: Selected Issues

IMF Staff Country Reports, July 31, 2019

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Indonesia: Selected Issues

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Bibliographic details

• Published: July 31, 2019
• Series: IMF Staff Country Reports
• DOI: https://doi.org/10.5089/9781513509136.002

Overview of the analysis

• Uses data on monthly export and import price and volume at the sectoral level to estimate pass-through effects of exchange rate changes to trade price and volume.
• Identifies adjustment frictions that depend on the source of the exchange rate fluctuation and the degree of integration in global value chains.

Key findings on pass-through and trade

• Combining price and volume effects, a 10 percent depreciation in the exchange rate is associated with a rise in the goods net-exports of up to 1.6 percent of GDP.
• Considerable asymmetry and sectoral heterogeneity in pass-throughs of exchange rate on import and export prices.
• Import prices:
  • Adjust well to exchange rate fluctuations.
  • Effects are stronger for appreciation episodes.
• Export prices:
  • Price sensitivity to exchange rate shocks is generally lower than for imports.
  • Sensitivity is concentrated over shorter horizons and during episodes of depreciation.

Implications for the current account

• The price and quantity results imply that exchange rate changes can have significant effects on the current account by affecting movements in net-exports of goods.

Data and methodology highlights

• Sectoral monthly data on export and import prices and volumes were employed to estimate pass-through coefficients and capture heterogeneity across sectors and episodes.

Subject areas and keywords

• Subject: Corporate income tax, Exchange rates, Foreign exchange, Medium term revenue strategy, Revenue administration, Revenue performance assessment, Tax administration core functions, Taxes, Value-added tax
• Keywords: Corporate income tax, CR, Exchange rates, Global, ISCR, market, market rate, Medium term revenue strategy, monetary policy decision, monetary policy press releases, monetary policy report, pass-through, pass-through coefficient, price, rate, Tax administration core functions, upside risk, Value-added tax

Source: Indonesia: Selected Issues (July 31, 2019).

Content in this bundle

• Indonesia: Selected Issues; IMF Country Report No. 19/251; June 17, 2019
  • Indonesia: Selected Issues; IMF Country Report No. 19/251; June 17, 2019 (Markdown version)
  • Indonesia: Selected Issues; IMF Country Report No. 19/251; June 17, 2019 (PDF)