An Assessment of Indonesia's Monetary Integration with Oil Exporter Countries in Islamic Nations: Evidence from Panel Data
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Abstract
The paper aims to assess the monetary integration between Indonesia and oil exporting countries in Islamic countries. Increasing the oil trade intensity between Indonesia and oil-producing countries can drive monetary integration among them. This study applies the Optimum Currency Area (OCA) index to measure the degree of monetary integration between Indonesia and 21 oil-producing countries in the OIC. The results exhibit that the majority of oil-producing countries are strongly integrated with Indonesia. The panel regression test highlights two variables – the inflation similarity and trade openness – which had a significant effect on the OCA. This study provides an important policy base for Indonesia, primarily in improving its relations with oil-producing countries. Two channels – trade openness and maintaining harmonious price stability – are the entry point for Indonesia to integrate with oil countries.Keywords: Monetary integration; Optimum Currency Area; Islamic nations; Indonesia; oil countries.JEL Classifications: E42, F36, F33DOI: https://doi.org/10.32479/ijeep.8420Downloads
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Published
2019-11-13
How to Cite
Agustiar, M. (2019). An Assessment of Indonesia’s Monetary Integration with Oil Exporter Countries in Islamic Nations: Evidence from Panel Data. International Journal of Energy Economics and Policy, 10(1), 89–95. Retrieved from https://econjournals.com/index.php/ijeep/article/view/8420
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