The effects of Japanese economic performance on Indonesia

Abstract

This paper assesses how Japanese economic performance affects the Indonesian economy for the 1988 to 2004 period. The empirical evidence provided here suggests that Japanese growth appreciates the local currency in real terms, decreases the inflation and increases growth. As a side issue, we also documented that real exchange rate depreciation accelerates inflation and decreases growth in Indonesia.

Notes

¹ For a more extensive literature survey on this topic, see Backus et al. (1993).

² See Sims (1986) and Gordon and Leeper (1994).