Pass-Through Effects of Exchange Rates and Tariffs on Indonesia^s Import Prices
Kadek Saputra Dwi Adnyana (a*), Rossanto Dwi Handoyo (b)

(a) Faculty of Economics and Business, Universitas Airlangga
(b) Faculty of Economics and Business, Universitas Airlangga

Abstract

This study aims to analyze the effect of the real exchange rate and most favored nation (MFN) tariff on the price of imported products in Indonesia. The data used includes ten main imported products of Indonesia from 2008 to 2022. The Generalized Method of Moments (GMM) methods is used to overcome potential endogeneity in the dynamic panel model. The analysis shows that real exchange rates and MFN tariffs have a varied impact on the prices of imported products, depending on the characteristics of each commodity. In addition, the prices of partner countries^ export product and the existence of free trade agreements (FTAs) are also shown to have a direct influence on import prices. These findings provide an empirical basis for developing more sector-specific policies to control inflation and strengthen international trade cooperation.

Keywords: Exchange Rate Pass-Through- Tariff Pass-Through- Import Prices- Free Trade Agreement- Generalized Method of Moments

Topic: International economics