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Jurnal Ekonomi Malaysia

53 (2) 2019 177 – 184

The Effect of Intervening Variable towards Twin Deficit in Indonesia: The Application of Path Analysis
Kesan Pemboleh ubah Intervensi Terhadap Defisit Kembar di Indonesia: Aplikasi Analisis Laluan

Department of Development Economics
Faculty of Economics
Janabadra University
Jl. T.R Mataram 55-56 Yogyakarta
INDONESIA

erni_uh@janabadra.ac.id

1st Building Fakultas Ekonomi dan
Bisnis Universitas Sebelas Maret
Jalan Ir. Sutami 36 A Surakarta Central Java Indonesia
Post code: 57126
INDONESIA

jj-sarungu@yahoo.com

1st Building Fakultas Ekonomi dan
Bisnis Universitas Sebelas Maret
Jalan Ir. Sutami 36 A Surakarta Central Java Indonesia
Post code: 57126
INDONESIA

yanto.mul@gmail.com

1st Building Fakultas Ekonomi dan
Bisnis Universitas Sebelas Maret,
Jalan Ir. Sutami 36 A Surakarta Central Java Indonesia
Post code: 57126
INDONESIA

amsoesilo@fe.uns.ac.id

Regional Office of the Directorate General of Treasury
Jl. Pasific Permai blok D7-D8 Jayapura Papua
INDONESIA

jito.pdie.uns@gmail.com

Abstract

This study examines twin deficits in Indonesia during the period of 1969-2015 using Path Analysis. Path analysis can test the direct and indirect effect of the variables studied and simultaneously identify the role of the intervening variables. Data used in this study include government budget deficit (BD) as the exogenous variable, interest rate (IR) and domestic exchange rate (FER) as the endogenous intervening variables, and deficit on the current account of balance of payment (DBOP) as the endogenous variable. This study found no direct effect between BD and DBOP. The finding indicates that an increase in budget deficit may not necessarily lead to an increase in current account deficits, and therefore do not prove twin deficits in Indonesia. Therefore, Mundell-Fleming’s theory in Indonesia is not applicable because the role of intervening variables (IR and FER) in mediating twin deficits is relatively weak.

Keywords

intervening variables; path analysis; twin deficits

Author’s Acknowledgement

The first author would like to express gratitude to the Ministry of Research, Technology and Higher Education of the Republic of Indonesia for providing financial support through Doctoral Dissertation Grant Scheme number 109/SP2H/LT/DRPM/2018.

http://dx.doi.org/10.17576/JEM-2019-5302-13
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Hasanah, , Sarungu, , Mulyanto, , Soesilo, , & Suparjito, (2019). The Effect of Intervening Variable towards Twin Deficit in Indonesia: The Application of Path Analysis. Jurnal Ekonomi Malaysia, 53(2), 177–184. http://dx.doi.org/10.17576/JEM-2019-5302-13

@article{hasanah2019effect,
  title={The Effect of Intervening Variable towards Twin Deficit in Indonesia: The Application of Path Analysis},
  author={Hasanah, Erni Ummi and Sarungu, JJ. and Mulyanto, and Soesilo, AM. and Suparjito, },
  journal={Jurnal Ekonomi Malaysia},
  volume={53},
  number={2},
  pages={177—184},
 

year={2019},
}

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