Gravity modeling approach for Indonesia’s exports with ten Asian countries

Abstract

The main objective of this research is to study the opportunities and the constraints of Indonesian export sector to various countries in Asia using the Gravity Model approach. Annual panel data is used to estimate and evaluate the empirical results for the period 1987-2014. We examine the opportunities and the constraints of the Indonesia’s export flows between different locations from Indonesia to other Asian countries. The results showed that the market size, the investment level, the exchange rates and the inflation rate in trading partner countries can be considered the signals for an export opportunity for Indonesia. Geographical distance is a factor that has significant influence in Indonesia's trade with other Asian countries.