EFFECT OF GLOBAL ENERGY AND FOOD PRICES AND EXCHANGE RATE ON ENERGY AND NON-ENERGY IMPORT DEMAND: EMPIRICAL EVIDENCE FROM INDONESIA

Abstract

This research aims to analyze the effect of changes in global energy and food prices and exchange rates on demand for oil and gas and non-oil and gas imports in Indonesia. This research applies the Autoregressive Distributed Lag (ARDL) model to capture long-run and short-run effects. The research period taken was 2012M01 – 2023M02. Empirical findings show that in the long run, global oil prices, food prices, and exchange rates have a negative effect on demand for oil and gas imports in Indonesia. Meanwhile, global food prices have a negative effect on non-oil and gas imports. Indonesia, which still depends on imports of non-oil and gas commodities, especially food imports, will be vulnerable to food inflation problems caused by food imports. In the short run, the influence of oil prices and exchange rates on oil and gas imports is distributed over several months. Meanwhile, coal prices and the exchange rate have a negative effect on non-oil and gas imports. In the short run, imports of oil and gas and non-oil and gas commodities, which tend to be uncontrolled by changes in world commodity prices and exchange rates, need to be a concern for policymakers in reducing the impact on domestic inflation. The trend of non-oil and gas imports that are increasing all the time needs to be of concern to the government regarding the impact of rising global commodity prices and the depreciation of the local currency on domestic inflation through imports