TESTING THE J-CURVE PHENOMENON ON INDONESIA'S TRADE BALANCE WITH THE FIVE BIGGEST TRADING PARTNERS

Authors

  • Muhammad Celvin Hamid Universitas Lampung, Indonesia
  • Tiara Nirmala Universitas Lampung, Indonesia
  • Imam Awaluddin Universitas Lampung, Indonesia

DOI:

https://doi.org/10.22515/jmif.v4i2.9672

Keywords:

J-Curve, Trade Balance, Real Exchange Rates, Export, Import

Abstract

The J-Curve is an assumption that exchange rate depreciation will improve a country's trade balance in the long term. This phenomenon occurs when exchange rate depreciation causes the trade balance to worsen in the short term. However, in the long term the trade balance will improve and increase permanently. This study aims to test whether the J-Curve phenomenon occurs in Indonesia's bilateral trade balance with the five largest trading partners using the Vector Autoregressive (VAR) method and in the observation period 2010.1-2022.12. The results of the analysis of the Impulse Response Function (IRF) show that the J-Curve phenomenon occurs in the trade balance model between Indonesia and Japan and the United States. Meanwhile, for Indonesia's trade balance with the European Union, exchange rate depreciation can improve the trade balance directly. For Indonesia's trade balance with China and Singapore, exchange rate depreciation improves the trade balance initially, but will worsen (inverted J-curve) in the long term so that the long-term impact of exchange rate depreciation on the trade balance is negative.

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References

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Appleyard, D. R., & JR, A. J. F. . (2014). International Economics (8th ed.). McGraw-Hill/Irwin.

Bahmani-Oskooee, M., & Harvey, H. (2017). The J-curve and bilateral trade balances of Indonesia with its major partners: are there asymmetric effects? New Zealand Economic Papers, 53(1), 63–76. https://doi.org/10.1080/00779954.2017.1371207

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Wijaya, E. (2020). Analisa Perdagangan Bilateral Indonesia dengan Pendekatan Marshall Lerner Condition dan Fenomena J Curve. Jurnal Dinamika Ekonomi Pembangunan, 3(3), 187–201. https://doi.org/10.14710/jdep.3.3.187-201

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Acemoğlu, D., List, J., & Laibson, D. (2009). Macroeconomics. Erlangga.

Appleyard, D. R., & JR, A. J. F. . (2014). International Economics (8th ed.). McGraw-Hill/Irwin.

Bahmani-Oskooee, M., & Harvey, H. (2017). The J-curve and bilateral trade balances of Indonesia with its major partners: are there asymmetric effects? New Zealand Economic Papers, 53(1), 63–76. https://doi.org/10.1080/00779954.2017.1371207

Ginting, A. M. (2014). Perkembangan Neraca Perdagangan Dan Faktor-Faktor Yang Mempengaruhinya. Buletin Ilmiah Litbang Perdagangan, 8(1), 51–72. https://doi.org/10.30908/bilp.v8i1.85

Gujarati, D. N. (2009). Dasar-dasar Ekonometrika Edisi 5 Terjemahan (5th ed.). Penerbit Salemba Empat.

Hapsari, A. T., & Kurnia, A. S. (2018). Fenomena Kurva J Pada Neraca Perdagangan Indonesia Dengan Enam Negara Mitra Dagang Utama. Jurnal Dinamika Ekonomi Pembangunan, 1(2), 10. https://doi.org/10.14710/jdep.1.2.10-27

Indrasari, D. R., Soelistyo, A., & Anjaningrum, W. D. (2024). Determinants of Indonesia’S Trade Balance: a Vecm Model Approach. Jurnal Ilmiah Bisnis Dan Ekonomi Asia, 18(2), 193–204. https://doi.org/10.32815/jibeka.v18i2.2012

Ishtiaq, N., Qasim, H. M., & Dar, A. A. (2016). Testing the Marshall-Lerner Condition and the J-Curve Phenomenon for Pakistan: Some New Insights. International Journal of Economics and Empirical Research, 4(6), 307–319.

J-Curve For Indonesia ’ s Trade Balance With Non-Linier ARDL. (2024). Financial Engineering, 2, 270–282. https://doi.org/10.37394/232032.2024.2.26

Krugman, P. R. (2000). Technology, Trade and Factor Prices. Journal of International Economics, 50(1), 51–71.

Mankiw, N. G. (2009). Macroeconomics (5th ed.). Worth Publisher.

Mwito, M. M., Mkenda, B. K., & Luvanda, E. (2021). The asymmetric J-curve phenomenon: Kenya versus her trading partners. Central Bank Review, 21(1), 25–34. https://doi.org/10.1016/j.cbrev.2020.09.001

Nopeline, N., Sirojuzilam, Tanjung, A. A., & Syafii4, M. (2023). The J-curve of Indonesia Trade Balance with His Trading Partners: Autoregressive Distributed Lag Method. Montenegrin Journal of Economics, 18(4).

Putri, K. H. (2019). the Impact of Depreciation of Exchange Rate Toward Trade Balance in Indonesia: Time Series.

R, R. L., & Saudi, M. H. M. (2020). Analysis of the Factors Affecting Trade Balance in Indonesia. International Journal of Psychosocial Rehabilitation, 24(02), 3113–3120. https://doi.org/10.37200/ijpr/v24i2/pr200617

Ricci, L. A., Milesi-Ferretti, G. M., & Lee, J. (2008). Real Exchange Rates and Fundamentals: A Cross-Country Perspective. Journal of Money, Credit and Banking, 45(5), 845–865.

Sabila, A. (2018). Fenomena Kurva J Pada Fluktuasi Nilai Tukar Di Neraca Perdagangan Bilateral Indonesia. Fakultas Ekonomi, Universitas Islam Indonesia Yogyakarta.

Siklar, I., & Celik Kecili, M. (2018). Estimation of the Marshall-Lerner Condition and J Curve Dynamics for Turkey. International Journal of Economics and Financial Research ISSN, 4(5), 125–130.

Wijaya, E. (2020). Analisa Perdagangan Bilateral Indonesia dengan Pendekatan Marshall Lerner Condition dan Fenomena J Curve. Jurnal Dinamika Ekonomi Pembangunan, 3(3), 187–201. https://doi.org/10.14710/jdep.3.3.187-201

Yenipazarlı, A., & Güneş, S. (2012). The Bilateral J Curve: Turkey Versus EU 27. EBES Euroasia and Business Society Conference …, June.

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Published

2024-12-30

Issue

Vol. 4 No. 2 (2024): Journal of Management and Islamic Finance

Section

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Copyright (c) 2025 Muhammad Celvin Hamid, Tiara Nirmala, Imam Awaluddin

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