DETERMINANTS OF INDONESIA'S ECONOMIC STABILITY: THE ROLE OF NATURAL COMMODITIES, FISCAL, AND MONETARY POLICIES
DOI:
https://doi.org/10.5281/zenodo.22729191Keywords:
ARDL, commodity prices, economic stability, fiscal policy, foreign exchange reservesAbstract
As an open developing economy, Indonesia's economic stability remains vulnerable to external shocks, particularly fluctuations in natural resource commodity prices, while also being shaped by domestic fiscal and monetary policy dynamics. This study analyzes the partial and simultaneous effects of natural resource commodity price fluctuations, government expenditure, inflation, exchange rate, and foreign exchange reserves on Indonesia's economic stability, grounded in the Commodity Price Shocks Theory, Dutch Disease Theory, the Keynesian fiscal multiplier theory, and the Buffer Stock Theory of reserves. A quantitative approach was employed using secondary time-series data for 1975-2025 sourced from the World Bank, Bank Indonesia, and Statistics Indonesia, analyzed using the Autoregressive Distributed Lag model in EViews. The best-fitting model is ARDL (10,4,4,4,1,4), with a significant error correction coefficient of -0.959 and an R-squared of 0.991. The Bounds Test confirms a long-run cointegrating relationship among the variables. In the short run, all five variables significantly affect economic stability at various lags, whereas in the long run none are statistically significant, although coefficient directions remain consistent with theory. The model passed all classical assumptions and stability tests, underscoring the need for growth diversification and stronger fiscal-monetary policy effectiveness.
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Copyright (c) 2027 Ahmad Hambali Nugraha, Jariah Abu Bakar, Ichsan, Cut Putri Mellita Sari
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