ANALYSIS OF THE IMPACT OF MACROECONOMIC POLICIES ON TEXTILE INDUSTRY AND ITS PRODUCTS IN INDONESIA

Abstract

Textile and textile’s product play an important role in the Indonesian economy. During the last five years, however, share of these industries and commodities to gross domestic product tend to decrease. The objectives of this study are to analyze factors affecting Indonesian textile and textile’s product, and the prospect of Indonesian textile and textile’s product in the future. Results of the study show that domestic textile production was affected by world cotton price and wage rate, while the domestic garment production was affected by wage rate in the garment sector. Indonesia’s textile export to world market was influenced by domestic textile price, and Indonesia’s export garment was influenced by exchange rate (Rp/US$). Indonesian textile demand was affected by wage rate and domestic garment demand was affected by income per capita of Indonesia. In general, the prospect of Indonesian textile and textile’s product seems not too good. In fact, Indonesian textile and textile’s product had depended on high import cotton, investment, and exchange rate. So why, economy policies are still needed to accelerate Indonesian textile and textile’s product developmentJEL Classification: C53, E60, F43, and F4.Keywords: export, open economy, forecasting, simulation, textile and textile’s product.