MBA432E – MACRO ECONOMICS

CIA -1

By

Sowmya M -1827661
Under the Guidance of

Dr. Shivakanth Shetty

Christ Institute of Management

CHRIST (DEEMED TO BE UNIVERSITY), Bengaluru

July 2019
 INDONESIA
Indonesia, a country in Southeast Asia is situated between the Indian and Pacific ocean. It is the
world's largest island country comprising of more than seventeen thousand islands and it is the
14th largest by land area and the 7th largest by combined sea and land area. Jakarta is the Capital
of Indonesia and the currency followed there is Indonesian Rupiah. With over 261 million people
in the country, it is the world's 4th most populous country. Java which is the world's most populous
island is home to more than half of the country's population.

Macro-Economic Indicators of Indonesia:

Macro-Economic indicators help in gauging the overall health of an economy from various
standpoints. The macroeconomic indicators of Indonesia are as follows:

1. GDP (Gross Domestic Product) of Indonesia: The GDP of Indonesia was US$1.015 trillion
in 2017 and reached US$1.042 trillion in 2018. It has grown by 5.2% in 2018 and 5.1% in
2017, clearly showing signals that it’s GDP is progressing. In fact, Indonesia’s economy
grew at the fastest pace in half a decade in 2018 because of growing trade.
2. Population: The population of the country was 262 million in 2017 and reached 268 million
in 2018. It is a growing economy with expanding population. Indonesia is also termed as
over populated country due to high birth rates.
3. Inflation: Inflation in the country grew at 3.2% in 2018. There was a slight dip in inflation
when compared to 2017 where it was 3.8%. It was the 4th year in a row that the inflation
was under control. This was due to stable administered prices of commodities such as fuel
and electricity and falling consumer prices in 2018.
4. Unemployment Rate: Indonesia’s unemployment rate was 5.1% in 2018 which is slightly
better than in 2017, where it was 5.5%. In Indonesia, unemployment is significantly higher
in the urban areas of the country compared to the rural areas. This is because rapid
urbanization is happening but there is no sufficient job creation.
 UNITED STATES OF AMERICA

The United States of America, is a country comprising of 50 states. United States is the
world's third largest country by total area and is slightly smaller than the entire continent
of Europe. With a population of over 327 million people, the U.S. is the third most populous
country. The capital of US is Washington, D.C., and the most populous city is New York City. It
is one of the world's most significant economic markets. The country is among the top three global
importers and exporters.

Macro-Economic Indicators of US:

US has trade relations with many countries. It is the global hub for trade. The macroeconomic
indicators of US are as follows:

1. GDP (Gross Domestic Product) of US: The GDP of USA was US$ 19.485 trillion in 2017
and reached US$ 20.494 trillion in 2018. It has grown by 5.2% in 2018 and 2.3% in 2017,
clearly showing that their economy was expanding in 2018. This was because exports grew
and at the same time personal spending grew due to increase in disposable personal income.
2. Population: The population of the country was 325 million in 2017 and reached 327 million
in 2018. The population is growing at a slower rate due to increase in the number of deaths
and low number of births. Immigration restrictions also has a played an impact in this.
3. Inflation: Inflation in the country was 1.9% in 2018. There was a slight dip in inflation
when compared to 2017 where it was 2.1%. This was due to the drop in oil and energy
prices. Gas prices also fell by 0.5%. Oil price reduction was the major contributor in
ensuring US inflation was under control.
4. Unemployment Rate: US unemployment rate was 3.7% in 2018 which is slightly better
than in 2017, where it was 4.4%. This is a good sign for the US economy as rising
unemployment has been one of its major issues. Hiring was maximum in business service,
construction and healthcare sector.
MACROECONOMIC POLICY IN INDONESIA:

Indonesia faced key economic challenges after its military-led authoritarianism was replaced with
a multi-party democracy, and its state-led economy was replaced with a market-based one.
Indonesia undertook significant institutional reforms and since 2001 it has undertaken political
and economic decentralization. Decentralization delegated and transferred many powers to local
governments, particularly at the district level. Then it witnessed years of struggle and growth. Over
the last 15 years, fiscal policy has contributed to Indonesia’s economic growth by maintaining
macroeconomic stability. Indonesia maintained strong economic growth even in 2017. It is
growing faster due to stronger investments, increasing net exports and the continued recovery in
commodity prices. Public investments also supported growth, with total government spending
growing the fastest in three years. The Indonesian Government implements fiscal stimulus
packages to boost investments.

Review of the Research Article – Impact of Export Development

This research article analyzes the effect of interest rate, Foreign Direct Investments (FDI), inflation
and Rupiah exchange rate on Indonesian export performance. It uses data from 1986-2016 and
multiple linear regression analysis is done on the data. For the period 1986-2016 Indonesian
exports showed a positive development despite a decline in the period 2012-2016. The study aims
to find that interest rate has a negative and significant effect on export, positive and significant
impact on Foreign Direct Investments, positive and significant effect on inflation and positive and
significant influence on exchange rate of Indonesian exports. The test results proved that the
Influence of FDI, Inflation and Exchange rate variables on exports is positive and that the effect
of interest rate on exports is negative. Also, exports have a significant and positive effect on Open
Unemployment Rate. It reflects that export activities do not absorb much labor. Theoretically, the
increase in exports will decrease unemployment, but in this study it shows that the increase of
exports resulted in open unemployment rate increasing.
Review of the Research Article – The Impact of Economic Indicators on Economic Growth

This research article dealt with analyzing macroeconomic indicators of Indonesia and economic
growth using panel data approach. It analyzes the relationship between inflation and interest rate
with economic growth because inflation and interest rate are macro-economic factors and are
closely related to the economic growth of a country. The research uses quantitative analysis.
Secondary data for the period 1990-2015 was used for this purpose. The relationship framework
was - higher the interest rate and inflation higher would be the economic performance of the
country. The hypothesis test in the study is done by using correlation Pearson test. The correlation
test showed that the correlation between GDP growth and interest rate is positive 0.620 with p
value 0.001. The results showed that there is relationship between interest rate and economic
growth and between inflation and economic growth.