Debt and Consumption in Indonesia: Ricardian Equivalence Approach

Prasda Ayunasta, Bambang Setiaji, Lukman Hakim

Abstract

Debt is a problem that is often discussed in all countries, especially for countries that are experiencing financial difficulties. The Asian crisis that occurred in 1998 and the global crisis in 2008 had a negative impact especially for Indonesia. This caused Indonesia to carry out foreign debt to save the economy. This research applies the Ricardian Equivalence concept in foreign debt problems in Indonesia. Ricardian Equivalence argues that current government debt will be a burden on public expenditure in the coming year. But assuming that the community behaves rationally, the foreign debt burden will not affect the consumption of the community. This study uses secondary data on household consumption, government foreign debt, gross domestic product, tax revenues, central government expenditures, and government budget deficits with the Impulse Response Function (IRF) method and Variance Decomposition with quarterly data from the first quarter of 1997 - fourth quarter 2017. Overall, if viewed from foreign debt, the Ricardian Equivalence does not apply in Indonesia after the Asian crisis in 1998 because foreign debt has an influence on public consumption. Conversely, after the global crisis in 2008 the Ricardian Equivalence prevails in Indonesia because foreign debt has no influence on public consumption.

Full Text:

PDF

References

A.McEachern, William. (2000). Ekonomi Makro: Pendekatan Kontemporer. Jakarta: Salemba Empat.

Abada, C. F. (2016). Exchange Rate, Interest Rate and Ricardian Equivalence Hypothesis: Evidence from Nigeria. Mediterranean Journal of Social Sciences, 7(5), 58–66. https://doi.org/10.5901/mjss.2016.v7n5p58

Adji, Artidiatun; Alm, J. (2016). Testing for Ricardian Equivalence in Indonesia. Journal of Contemporary Economic and Business Issues, 3(1), 5–31. Retrieved from http://hdl.handle.net/10419/147476%0AStandard-Nutzungsbedingungen:

Ace, Partadiredja. (1990). Pengantar Ekonomika. Yogyakarta : BPFE.

Ade, Suherman. (2011). Analisis Pengaruh Kompetensi Account Representative dan Independensi Account Representative serta Penerapan Benchmarking Laporan Keuangan Wajib Pajak Terhadap Penerimaan Pajak Kanwil DJP Sumut I. Tesis. Medan: Universitas Sumatera Utara.

Agus, Widarjono. (2013). Ekonometrika Pengantar Dan Aplikasinya. Jakarta: Ekonosia.

Ajija, Shochrul Rohmatul, et al. (2011). Cara Cerdas Menguasai Eviews. Jakarta: Salemba Empat.

Barro, R. J. (1974). Are Government Bonds Net Wealth? Journal of Political Economy, 82(6), 1095–1117. https://doi.org/10.1086/260266

Barro, R. J. (1989). The Ricardian Approach to Budget Deficits. Journal of Economic Perspectives, 3(2), 37–54. https://doi.org/10.1201/b19901-73

Belingher, D. (2015). Empirical evidence on the Ricardian equivalence in Romania. The Institute of Economic Forecasting, Romanian Academy, Bucharest, XXII(2), 163–170.

Case, Karl E., & Ray, C Fair. (2007). Prinsip-Prinsip Ekonomi. Edisi Kedelapan Jilid 1. Jakarta: Erlangga.

Das, R. C. (2017). Environmental Infrastructures for Economic Growth. Business Science Reference (an Imprint of IGI Global), i, 189–215. https://doi.org/10.4018/978-1-5225-2364-2.ch010

Due, John F. (1968). Government Finance: Economics of The Public Sector, 4th Edition. USA: Richard D. Irwin Inc.

Gujarati, Damodar. (2003). Ekonometri Dasar. Terjemahan: Sumarno Zain, Jakarta: Erlangga.

Hakim, L. (2006). Pengaruh Utang Luar Negeri, Kebijakan Fiskal terhadap Konsumsi Masyarakat dalam Paradigma Ricardian Equivalence 1990-2004: Penerapan Model Vector Autoregressions (VAR). Jurnal Ekonomi Pembangunan, 11(2), 125–145.

Hutagaol, John. (2007). Perpajakan Isu-isu Kontemporer. Jakarta: Graha Ilmu.

Insukindro. (1990). The Short and Long-Term Determinant of Money and Bank Credit Markets in Indonesia. Departement of Economics University of Essex.

Kormendi, R., & Meguire, P. (1990). Government debt, government spending and private sector behavior: reply and update. American Economic Review, 80(5), 604–617.

Kurniati, F. I. (2010). Studi Komparasi Dampak Krisis Finansial Asia 1997-1998 Dan Krisis Global 2008 Terhadap Indonesia. Universitas Indonesia. 32-40.

Mankiw, N. Gregory. (2008). Makroekonomi. Edisi Keenam. (Terj.) Fitria Liza dan Imam Nurmawan. Jakarta: Erlangga.

Mankiw, N. Gregory, et al. (2013). Pengantar Ekonomi Makro. Edisi Asia Vol. 2. Jakarta: Salemba Empat.

Marinheiro, C. F. (2002). Ricardian Equivalence: An Empirical Application to the Portuguese Economy (GEMF Working Paper No. 307044). Retrieved from Faculty of Economics of the Coimbra University, Grupo de Estudos Monetários e Financeiros. https://doi.org/10.2139/ssrn.307044

Marzouk, M,. & Oukhallou, Y. (2016). Fiscal policy and the Ricardian equivalence: Empirical evidence from Morocco. Journal of Economics Library, 3(1), 100–110.

Mosikari, T. J., & Eita, J. H. (2017). Empirical test of the Ricardian Equivalence in the Kingdom of Lesotho. Cogent Economics and Finance, 5(1), 1–11. https://doi.org/10.1080/23322039.2017.1351674

Nanga, Muana. (2001). Makroekonomi: Teori, Masalah dan Kebijakan, Jakarta: PT Raja Grafindo Persada.

Nelson, C., & Emmanuel, O. (2016). Does the Ricardian Equivalence Hypothesis Hold for Nigeria and Ghana ? European Journal of Scientific Research, 138(2), 168–181.

Pickson, R. B., & Ofori-Abebrese, G. (2018). Ricardian Equivalence Hypothesis in the Sub-Sahara African Countries. Journal of Economic Integration, 33(3), 466–487. https://doi.org/10.11130/jei.2018.33.3.466

Saraswati, B. D., & Wahyudi, S.T. (2018). The Effect of Fiscal Policy on the Indonesian Household Consumption : The Application of the Ricardian Equivalence Hypothesis. Review of Integrative Business and Economics Research, 7(4), 90–98.

Shamsi, N., & Waqas, M. (2016). Government debt and budget deficit nexus in Pakistan: Evidence from Ricardian Equivalence Hypothesis . Romanian Journal of Fiscal Policy, 7(1), 14–23.

Soediyono, R. (1992). Ekonomi Makro Pengantar Analisis Nasional. Edisi ke empat. Yogyakarta: Liberty.

Sudarsono, H. (2009). Dampak Krisis Keuangan Global terhadap Perbankan di Indonesia: Perbandingan antara Bank Konvensional dan Bank Syariah. La_Riba Jurnal Ekonomi Islam, 3(1), 12–23. https://doi.org/10.20885/lariba.vol3.iss1.art2

Sugiyono. (2010). Metode Penelitian Pendidikan Pendekatan Kuantitatif, kualitatif, dan R&D. Bandung: Alfabeta

Suparmoko. (1991). Pengantar Ekonomi Makro. Yogyakarta: BPFE

Widodo, HGST. (1990). Indikator Ekonomi : Dasar Perhitungan Perekonomian Indonesia. Yogyakarta: Kanisius.

Refbacks

  • There are currently no refbacks.