The Impact of World Food Price Fluctuation towards Indonesian Macroeconomics

Abstract

<p class="Normal1"><span class="normalchar"><em>Stability of price is a crucial factor for export and import activities, especially food commodities.</em></span><span class="apple-converted-space"><span> </span></span><span class="normalchar"><em>Indonesia with the characteristics of a small open economy are vulnerable to external price shock as the implication of economic globalization.</em></span><span class="apple-converted-space"><span> </span></span><span class="normalchar"><em>Understanding the food price shock useful for designing risk mitigation to minimize the effects of shocks to macroeconomic variables.</em></span><span class="apple-converted-space"><span> </span></span><span class="normalchar"><em>The purpose of this research is to analyze the impact of macroeconomics from </em></span><span class="normalchar"><em><span lang="EN-US">V</span>ector </em></span><span class="normalchar"><em><span lang="EN-US">A</span>uto</em></span><span class="normalchar"><em><span lang="EN-US">-R</span>egression (VAR) methods.</em></span><span class="apple-converted-space"><span> </span></span><span class="normalchar"><em>The sensitivity of impulse response estimation and variance decomposition which outlines how large and how the effect of the food price shock.</em></span><span class="apple-converted-space"><span> </span></span><span class="normalchar"><em>Impulse response analysis shows shocks on global food price got the response by fastest and the most powerful by inflation.</em></span><span class="apple-converted-space"><span> </span></span><span class="normalchar"><em>While the description of variance decomposition, variation described by economic growth.</em></span><span class="apple-converted-space"><span> </span></span><span class="normalchar"><em>The results show that the global food price affects economic growth that is transmitted through inflation.</em></span></p>