MACROECONOMICS

INTERNATIONAL TRADE, EXCHANGE RATE, PURCHASING POWER PARITY,

DEMAND AND SUPPLY OF LOANABLE FUNDS, AND FOREX

Muhammad Fadli Hanafi, S.E., MM

FLOW OF GOODS: EXPORTS, IMPORTS, AND
NET EXPORTS
• Applies in an open economy, technically consists of exports
and imports.
• Exports are basically domestically produced goods and
services sold abroad.
• Imports are basically foreign-produced goods and services
sold domestically.
NET EXPORT (TRADE BALANCE)
• Difference between value of country’s exports and value
of country’s imports.
• Positive net export indicates trade surplus (exports are
greater than imports)
• Negative net export indicates trade deficit (exports are less
than imports)
Determinant of International Trade
• The tastes of consumers for domestic and foreign goods
• The prices of goods at home and abroad
• The exchange rates at which people can use domestic currency to buy
foreign currencies
• The incomes of consumers at home and abroad
• The cost of transporting goods from country to country
• Government policies toward international trade
Examples of Trade Agreement

AGREEMENT COUNTRIES INVOLVED

NAFTA (1992) United States, Mexico, and Canada
CAFTA (2004) Guatemala, El Salvador, Honduras, Costa Rica,
Nicaragua, and the Dominican Republic
IJEPA (2007) Indonesia and Japan
ACFTA (2010) ASEAN – China
AIFTA (2010) ASEAN – India
AKFTA (2010) ASEAN – Korea
Indonesia’s International Trade
20
Exports:
15
Textiles, Electronics, Rubber
10 and Derivatives, Palm Oil,
5
Forestry-based Products
%

0
Imports:
-5 Consumer Goods, Fuels, Raw
Materials, Spare Parts,
-10
2010 2011 2012 2013 2014 2015 2016 Capital Goods
Export 15.27 14.77 1.61 4.17 1.07 -2.12 -1.74
Import 17.34 15.03 8.00 1.86 2.12 -6.41 -2.27
The Flow of Financial Resources: Net Capital
Outflow
• Difference between purchase of foreign assets by domestic residents
and purchase of domestic assets by foreigners

Determinants:
• Real interest rates paid on foreign assets
• Real interest rates paid on domestic assets
• Perceived economic and political risks of holding assets abroad
• Government policies that affect foreign ownership of domestic assets
Equation of Identity
Net Capital Outflow = Net Export
or
(Capital outflow – capital inflow) = (Export – Import)

Changes in net capital outflow would be exactly the

same with changes in net exports
Sekilas tentang perang dagang AS - China

Tariff

Berawal dari slogan

“Make America Great Membalas dengan
Weapons mengenakan tariff
Again” dan “Long time
abuse of the broken pada produk Amerika
international system Serikat
Non-Tariff and unfair practices.”
Salah satu sasaran
China merupakan tembak paling jitu
contributor defisit pada sektor
terbesar Amerika pertanian US
Serikat
Sebenarnya ini tentang “China”…

China
merupakan
penyumbang
terbesar bagi
defisit
perdagangan
Amerika Serikat
Sekilas Perdagangan AS…
Amerika
Serikat
mengenakan
tariff pada
produk China
dengan
besaran
hingga 25%
Jadi bukan tentang produknya, tapi tariff impor
China terhadap produk AS yang lebih besar…
Dampak terhadap Indonesia…?
Perekonomian Indonesia 2011 - 2017
80 14
70 12
60 10
50
8
40
6
30
20 4

10 2
0 0
2011 2012 2013 2014 2015 2016 2017
HDI Gini Ratio GDP Growth (%) Poverty Rate (%)
Sumber: Tabulasi Penulis dari World Bank (2018)
Key driver pertumbuhan ekonomi Indonesia…
Pertumbuhan ekonomi 5.02%
Kemiskinan turun sebesar
didorong oleh peningkatan
2.03% dikarenakan terjaganya
belanja pemerintah sebesar
inflasi sebesar 3.61%, dan
2.14% dan peningkatan harga
peningkatan rerata upah
komoditas sehinggga nilai
minimum sebesar 8.25%
ekspor tumbuh sebesar 9.09%
Ekonomi
Indonesia

HDI meningkat sebesar 0.9% Kesenjangan sosial turun

oleh karena adanya
peningkatan angka harapan
hidup sebesar 1.02% dan
peningkatan akses pendidikan
sebesar 1.9%
sebesar 1.01% dikarenakan
pendapatan perkapita 40%
penduduk terbawah naik
sebesar 6.31%, dibandingkan
20% tertinggi sebesar 5.06%
Perdagangan Indonesia dan Amerika Serikat
Perdagangan Indonesia - AS
25 Ekspor non-migas ke
20 Amerika Serikat
15
berdampak positif
10
untuk kinerja
USD Billion

0 perdagangan Indonesia.
-5

-10
Ekspor unggulan
-15

-20
Indonesia ke AS
Neraca
2013
-4.1
2014
-2.2
2015
7.7
2016
9.5
2017
11.8
mencakup tekstil, karet,
Migas
Non-Migas
-12.6
8.6
-13.4
11.2
-6.0
13.7
-5.6
15.2
-8.6
20.4
dan produk perikanan
Perdagangan Indonesia dan China
Perdagangan Indonesia - China Perdagangan dengan
4
2 China berdampak
-
(2) negatif untuk kinerja
(4)
perdagangan Indonesia
USD Billion

(6)
(8)
(10)
(12)
(14)
Ekspor Indonesia ke
(16)
(18)
China mencakup karet,
2013 2014 2015 2016 2017
Neraca (7.25) (13.02) (14.36) (14.01) (12.68) CPO, pulp, abu logam,
Migas
Non-Migas
1.04
(8.29)
0.98
(14.00)
1.60
(15.96)
1.56
(15.57)
1.48
(14.16)
dan produk kimia
Komoditas Unggulan Indonesia…

Tekstil, barang
elektronik,
karet, dan CPO
masih menjadi
andalan
Indonesia
untuk ekspor
non-migas.
Dampak Terhadap Indonesia…?
• Dampak negatif terhadap ekspor bahan baku dari Indonesia
menurun, namun impor produk non-migas akan meningkat,
berpotensi melebarnya defisit perdagangan yang selanjutnya menekan nilai
mata uang Rupiah…

• Pelemahan ekonomi kedua negara akibat perang dagang berkibat pada

perlambatan pertumbuhan ekonomi Indonesia, dengan
pertimbangan AS (share 10.6%) dan China (share 13.2%) adalah mitra
dagang terbesar…

• Peluang positif untuk ekspor barang-barang jadi (finished goods) ke

AS dan China, maka dari itu kualitas manufaktur Indonesia harus
ditingkatkan
Rekomendasi… Harga Energi
Relatif Mahal

Peningkatan Biaya Logistik

Mahal
Daya Saing

Inovasi Belum
Optimal
Exchange Rates
• Nominal Exchange Rates
Rate at which a person can trade the currency of one
country for another currency
• Real Exchange Rates
Rate at which a person can trade the goods and
services of one country for the goods and services of
another
Calculating Nominal Exchange Rates
Amount of unit of a currency in exchange of one unit of other currency

Example 1
• USD 1 = 80 Yen
• 1 Yen = USD 0.0125

Example 2
• USD 1 = Rp. 14.570
• Rp. 1 = USD 0.0000686
Calculating Nominal Exchange Rates
USD to others Others to USD
Rupiah Indonesia
Ringgit Malaysia
USD 1
Baht Thailand
Singaporean Dollar
Bruneian Dollar
Calculating Nominal Exchange Rates (cont’d)
USD to others Others to USD
Rupiah Indonesia 13,514.81 0.000074
Ringgit Malaysia 4.11 0.243309
USD 1
Baht Thailand 32.74 0.030544
Singaporean Dollar 1.35 0.740741
Bruneian Dollar 1.35 0.740741
Calculating Real Exchange Rates
• Reflecting quantity of goods and services you would have (in any
countries) from certain amount of money.

𝑁𝑜𝑚𝑖𝑛𝑎𝑙 𝐸𝑥𝑐ℎ𝑎𝑛𝑔𝑒 𝑅𝑎𝑡𝑒 × 𝐷𝑜𝑚𝑒𝑠𝑡𝑖𝑐 𝑃𝑟𝑖𝑐𝑒

𝑅𝐸𝑅 =
𝐹𝑜𝑟𝑒𝑖𝑔𝑛 𝑃𝑟𝑖𝑐𝑒

Where RER is Real Exchange Rate

Calculating Real Exchange Rates (cont’d)
Supposed a bushel of American rice sells for USD 100, where it is actually
16,000 yen in Japan. What is the real exchange rate between Japanese and
American rice?

(80 𝑦𝑒𝑛/𝑈𝑆𝐷) × 𝑈𝑆𝐷100

𝑅𝐸𝑅 =
16,000 𝑦𝑒𝑛

8,000 𝑦𝑒𝑛 (𝑜𝑓 𝐴𝑚𝑒𝑟𝑖𝑐𝑎𝑛 𝑅𝑖𝑐𝑒)

𝑅𝐸𝑅 = = 0.5
16,000 𝑦𝑒𝑛 (𝑜𝑓 𝐽𝑎𝑝𝑎𝑛𝑒𝑠𝑒 𝑅𝑖𝑐𝑒)

The answer expresses that price of a bushel of American rice is half cheaper
than a bushel in Japan
Calculating Real Exchange Rates (cont’d)
Then what is the real exchange rate between Japanese and American
rice (treating Japan is your home country)

(𝑈𝑆𝐷 0.0125/𝑦𝑒𝑛) × 16,000𝑦𝑒𝑛

𝑅𝐸𝑅 =
𝑈𝑆𝐷 100

𝑈𝑆𝐷 200 (𝑜𝑓 𝐽𝑎𝑝𝑎𝑛𝑒𝑠𝑒 𝑅𝑖𝑐𝑒)

𝑅𝐸𝑅 = =2
𝑈𝑆𝐷 100 (𝑜𝑓 𝐴𝑚𝑒𝑟𝑖𝑐𝑎𝑛 𝑅𝑖𝑐𝑒)
Calculating Real Exchange Rates
A unit of table is USD 50 in the United States,
while it costs Rp. 337,500 in Indonesia. What is
the real exchange rate between American and
Indonesian table? And what is the real exchange
rate between Indonesian and American table?
(perform your calculation to show its consistency,
assuming USD 1 = Rp. 14.570)
Calculating Real Exchange Rates (cont’d)

In fact, macroeconomists
consider all price basket (of a
country rather than price of
single product)
Purchasing Power Parity (PPP)
• The theory comes up from the basic logic that a
good must sell for the same price in all locations
(law of one price)
• Different price of a product in different locations
is called arbitrage (or frequently called as
arbitrage opportunity.
Implications of Purchasing Power Parity

It starts with the theory of purchasing power

parity expressing that nominal exchange rate
between two countries must reflect the price
levels in those countries, thus nominal
exchange rates change when price levels
change
The Market for Loanable Funds
• The loanable funds market is a hypothetical market
that examines the market outcome of the demand for
funds generated by borrowers and the supply of funds
provided by lenders.
• The interest rate is the price, calculated as a
percentage of the amount borrowed, charged by the
lender to a borrower for the use of their savings for
one year.
The Market for Loanable Funds
• The rate of return on a project is the profit earned on the project
expressed as a percentage of its cost.
Real
The Demand for Loanable Funds
interest
rate

A
12%

B
4

Demand for loanable funds, D

0 $150 450 Quantity of loanable funds

(billions of dollars)
The Supply for Loanable Funds
Interest
rate

Supply of loanable funds, S

12%
Y

4
X

0 $150 450 Quantity of loanable funds

(billions of dollars)
Equilibrium in the Loanable Funds Market
Interest
rate

Projects with rate of

return
8% or greater are
funded.
12%
Offers not accepted from
lenders who demand interest
rate of more than 8%.
r* 8
Projects with rate of return
less than 8% are not
funded.
4

Offers accepted from lenders

willing to lend at interest
0 rate of 8% or less.
$300 Quantity of loanable
Q* funds
(billions of dollars)
Shifts of the Demand for Loanable Funds

• Factors that can cause the demand curve for loanable funds to shift
include:
• Changes in perceived business opportunities
• Changes in the government’s borrowing

• Crowding out occurs when a government deficit drives up the

interest rate and leads to reduced investment spending.
An Increase in the Demand for Loanable Funds
Interest
rate

An increase in the
r demand for
. . . leads to a 2 loanable funds . . .
rise in the
equilibrium r
interest rate. 1

D
2

D
1

Quantity of loanable funds

An Increase in the Supply of Loanable Funds
Interest
rate

S
1
S
2

r
. . . leads to a fall 1
in the equilibrium An increase in the
interest rate. supply for loanable
r
2 funds . . .

Quantity of loanable funds

FOREIGN EXCHANGE MARKET
where people trade currencies
THANK YOU