This paper attempt to examines the effects of the Ageing Population (AP) process on the public finance in Indonesia. As we know, Indonesia is one of the developing countries that experience the ageing population. In this case, the overlapping generation (OLG) framework is used to estimate the demographic transition and to simulate the effect of it to deficit budget. The results show that the aging process starts to kick in 2012. The ageing process has a significant impact to declining tax revenue and increasing government spending. They also show that the aging process puts an upward pressure on budget deficit. As a result Indonesia potentially faces a long-term threat to fiscal sustainability. Keywords: ageing, population, overlapping, spending, budge

This research analyzes the contagion effects of the US financial markets on Indonesian fi-nancial markets during the 2008 global financial crisis. It specifically investigates whether the slump in the US stock prices directly produced a slump in Indonesian stock prices, or indirectly through the slump in regional stock prices. It also examines whether the slump spilled over into rupiah exchange rate. Using Vector Autoregression and Vector Error Correction Model, the paper finds direct contagion effect of the US financial crisis into Indonesian stock markets. It also finds both direct and indirect contagion effect of the US financial crisis into foreign exchange market. Keywords: Contagion, stock price, exchange rate, financial crisis JEL classification numbers: G12, G15

The background of this study was an unbalanced dynamic space of Indonesian de¬velopment. The cross-region development showed that the region in Java, in general, de¬vel¬oped faster than in the others. The differences of cross-region growth, Java and out of Java impacted to a gap of wealth and developing cross-region. The purpose of this study was to estimate sources of regional growth between Java with the other regions, and to analyze regional disparity between Java with the other regions. The data used in this study was an¬nual data. The variables used in this study are per capita GRDP growth at constant prices (Y), capital growth (K), labor growth (L) and human capital growth (E). The model of regional economic growth was estimated with panel data. T-test and F-test were used to analyze dis¬parity of income growth. General conclusion of this study was the fact that significantly capital growth (K) influent regional economic growth. But, labor growth (L) and human capital growth (E) were not. The outcomes of statistic test showed that there was not re¬gional growth disparity. Key words: sources of growth, growth disparit.

Among the central issues in policy making are poverty alleviation and increasing income distribution. This paper measures the impact of economic growth on income inequality and poverty alleviation, namely whether income inequality becomes trade-off for poverty alleviation in 35 Central Java regencies. The paper uses fixed effect model by weighting cross section weights. The results show that economic growth increases income inequality. Furthermore, economic growth alleviates poverty and increases income inequality, but the effect is smaller than the reduction in poverty. Therefore, the increased income inequality is not a trade off to poverty alleviation and the economic growth is effective to alleviate poverty. Keywords: Economic growth, income inequality, poverty alleviation

It has long been set that the condition for maximum profit is MC=MR. Moreover, this condition has been one of doctrines in microeconomics for decades since Professor Marshall changed the name of the area from Political Economy to be Economics. The condition is mathematically derived from the process of profit maximization. This article is trying to ask whether the condition is valid for every situation. There is one hole that makes this condition seems weird, that is, in the case of unitary elastic and inelastic demand. In the first case the condition dictates that the producer should take infinity mark-up, while in the second case the condition commands to make a negative mark-up which is of course unreasonable in either way. This article also explores the possible argument for this condition, which is linear demand curve. Still, this argument cannot cover the entire cases. Furthermore, this article argues that the demand producers always face is either non linear or constant-elasticity in nature. The imperfection of the condition stems from the fact that it fails to impose second order (sufficient) condition when maximizing profit. This article is trying to explore the assumption-free condition by imposing second order (sufficient) condition. The result even though a bit complex in its expression but it gives a strong implication. Keywords: MC, MR, profit maximization

The aim of this paper is to analyze the determination of real effective exchange rate in Indonesia for the period 1994.1-2004.6 using behavioral approach. The sets of funda¬mental variables consisting of net foreign asset, term of trade, ratio total trade to GDP, pri¬vate and government consumption were used to estimate for resulting estimation of behav¬ioral real effective exchange rate. The data was used in this study using time series monthly data from 1994.1 – 2004.6. The source of data were taken from International Financial Statistic and Central Bank of Indonesia. The method of analysis is multivariate cointegration methods of Johansen to determine the long run relationship real effective exchange rate. Exchange rate misalign¬ment was also used in this study by plotting the series between actual real effective exchange rate and the behavioral equilibrium exchange rate. The results of this study showed that from the estimation result of behavioral equi¬librium exchange rate, some variables of the sets fundamental variables such as net foreign asset, term of trade and ratio total trade to GDP were correctly signed, plausible magnitude and statistically significant. But, government and private consumption were not statistically significant and incorrectly signed. From the plotted result between actual and equilibrium estimation, it represents that for the period post-1997, the currency has been undervalued. The close alignment between actual and equilibrium was occurred in 1998 and 1999. But at the end of the sample, the currency looked overvalued. Keywords: Real effective exchange rate, Behavioral equilibrium approach, Cointegration

The main objective of this paper is to evaluate the relative impact of financial sector development, government size and trade openness of a country on its economic growth. This is done to investigate which factors play more prominent role in leading the growth of the economy. Four ASEAN countries known for their similar economic orientation, namely Ma-laysia, Thailand, Indonesia and Singapore have been selected for this purpose. To achieve the objective, a series of econometric tests is applied. These include unit root test and cointe-gration test. A vector error correction model (VECM) is then applied to capture both the short-run dynamic and the long-run equilibrium relationship between variables. Impulse response function is utilized to look at the impact of each variable on economic growth while variance decomposition is used to measure the magnitude of the impact. The results show that trade openness plays the leading role in promoting economic growth in Malaysia, Sin-gapore and Indonesia. For Malaysia financial sector development follows second and the government size comes third while for Singapore the order is reverse. For Indonesia, the government size overtakes the leading role at the later stage while the financial sector devel-opment is immaterial. For Thailand, no firm conclusion can be made, as the results are not promising. The results signify that the right policies have been taken by the selected coun-tries to promote higher economic growth. \n\nKeywords: Economic growth, financial sector development, government size, trade openness.\n

This paper attempts to explore to what extent the current regime has changed the investment attractiveness and illegal charges in doing business in Yogyakarta Special Region (DIY). We focus on five factors that lead to regional investment attractiveness, in particular institutional, social-political, regional economy, labor and productivity, and physical infrastructure factor. This paper combined KPPOD method to analyze investment attractiveness at regional level and Analytical Hierarchy Proccess (AHP) to examine the business climate in DIY. We find that noneconomic factor, rather than economic factor, constituted a key factor based on business perspective. The institutional factor is found as the most important factor, followed by physical infrastructure, and social political factor. Interestingly, business community perceived illegal charges persistanly high in DIY, in particular public service, court, and police. Therefore, we argue some suggested corrective actions based the surveys are badly needed for local governments in DIY. Key words: AHP, pungli, daya tarik investasi, peringkat, KPPOD

This study analyzes Indonesian aggregate imports by using expenditure components approach since Indonesian Economy relies highly on import. The relationship between ag¬gregate imports and the component of final demand expenditure namely public and private consumption expenditure, investment expenditure and export is investigated because the dif¬ferent components of final demand expenditure have different import contents. In addition, the model also includes price of import as a determinant demand for import. Johansen Multivariate co integration is proposed to analyze the import behavior in the long run. To examine response of import to its determinants in the short run, an error correction model is applied. Quarterly data during 1990.1-2003.2 are used for the analysis. The results demonstrate both the components of final demand expenditure and price of im¬port are all important factor in determining aggregate demand for imports not only in the long run but also in the short run. Keywords: Demand for imports, Components of final demand expenditure, Cointegration, Error Correction Model.

Judul Buku   : Otonomi dan Pembangunan Daerah Penulis   : Mudrajat Kuncoro, Ph.D. Penerbit  : Erlangga, Surabaya Tahun   : 2004 Tebal   : xiii+345