Influential Factors of Indonesian Cocoa Export: Evidence from FMOLS and DOLS Approaches

Abstract

The study investigated the determinants of cocoa exports using both FMOLS and DOLS approaches. The time series data were obtained from FAOSTAT and ICCO websites from the year 1990 to 2022. ADF and PP stationary unit roots were conducted to examine the stationarity of the variables while Johansen cointegration was used to verify the cointegrating among the variables. The outcome of the Johansen cointegration analysis suggests the existence of a cointegration relationship among the eight variables, indicating the presence of long-run relationships among the variables. The estimated results revealed that cocoa productivity, domestic cocoa production, domestic cocoa supply, exchange rates, and world cocoa prices affect Indonesian cocoa exports. Based on the estimated results and discussion, the study draws a conclusion that cocoa productivity, domestic cocoa production, exchange rates, and world cocoa prices positively and statistically significantly influenced cocoa exports while domestic cocoa supply negatively affected Indonesian cocoa exports. The study recommends that the government of Indonesia should stabilize the fluctuating exchange rates and encourage cocoa production via higher productivity by practicing farm rehabilitation practices to increase productivity and cocoa beans for exports. Moreover, the supply of cocoa beans should also be increased by increasing domestic producer prices. These key determinants are crucial for policymakers and industry stakeholders to understand and address to enhance the competitiveness and growth of the cocoa export industry in Indonesia.