The impact of Trade Liberalization on Performance of Indonesian Cocoa Economy

Abstract

This study aims to analyze the impact of trade liberalization in the form of the abolition of trade restrictions on the performance of Indonesian cocoa economy. The study was conducted based on the analysis of time series data for 23 years (1990-2012). Framework econometric model prepared by classifying economic system of Indonesian cocoa into three blocks, namely: production block, block supply and demand, and block trades. Each block consists of several structural similarities and identities. The next step was to model formulation, re-specification the model and evaluate the results of the alleged parameters, model validation and simulation. The analysis showed that the cocoa trade liberalization would be increase the acreage of cocoa, productivity, production, the price of cocoa Indonesia, the export price of cocoa and quantity of cocoa exports. This policies had no impact on domestic demand due to rising prices of Indonesian cocoa. Production policy (raising acreage of cocoa) would be increase the production and the productivity of cocoa. As a result, the export and the export price of cocoa rose. Economic policies (lowering interest rates and the price of urea fertilizer), would be increase the acreage of cocoa and cocoa production but the productivity was down.

Keywords: liberalization, trade, economic performance, palm coconut