Exchange Rate, Inflation And Export-Import Indonesia And China (Comparative Analysis Before And After Free Trade)

Abstract

International traders need the relevant information when they make import or export decision. The change of international price, exchange rate and inflation are the things considered in international market. Since the elimination trade barriers, it is very clear that the implementation ASEAN-China Free Trade has changed the international price of products and services. How could it be for a country? How exchange rates, inflation and free trade give impact toward export and import of Indonesia and China?
The research aim is to show how exchange rates and inflations predict exports and imports before and after free trade by using Indonesia-China data analysis technique namely regression analysis, partial (t-test), simultaneous (F-test) and adjusted square. Sources of data are obtained from legal website of Central Bureau of Statistics of Indonesia. The data of import-export are divided into two parts, namely from 2005 to December 2009 is used to measure the performance of data before Free Trade. And from 2010 to 2014 is used to measure the performance of data after free trade
The results of study shows the inflation rate decreases after free trade. On contrary, exchange rate increases after the free trade. Exchange rate has preponderant influence than inflation before and after free trade. Both inflation and exchange rate have no strong impact toward import before and after the implementation free trade. It could be concluded that there is no significant relation of simultaneous inflation and exchange rate toward import before the implementation of free trade. In contrary, inflation and exchange rate has strong relation toward import after the implementation of free trade. Import linear regression has different before and after the implementation of free trade.
Export increases after the implementation of free trade. Both correlation of inflation and exchange rate have changed from negative become positive. Inflation rate has more preponderant influence than exchange rate before free trade. In contrary, exchange rate has more preponderant influence than inflation rate after free trade. It refers that both inflation and exchange rate have no strong impact toward export before and after the implementation free trade. Analysis of variance shows that there is no simultaneous relation of both inflation and exchange rate toward export before and after the implementation of free trade. Export linear regressions shows that trend line is different before and after free trade. And exports were much bigger from Indonesia to China after the implementation of free trade.