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…(Scopus)Do International Oil Prices, Exchange Rates and Agricultural Credit Matter for Farmers’ Term of Trade in Indonesia? Empirical Evidence of Multiple Thresholds and Asymmetric Effects
Arintoko Arintoko
Universitas Jenderal Soedirman
Herman Sambodo
Department of Economics and Development Studies, Faculty of Economics and Business, UniversitasJenderal Soedirman, Purwokerto 53122, Indonesia
Rakhmat Priyono
Department of Economics and Development Studies, Faculty of Economics and Business, UniversitasJenderal Soedirman, Purwokerto 53122, Indonesia
DOI: https://doi.org/10.36956/rwae.v6i1.1305
Received: 15 November 2024; Published: 23 December 2024
Copyright © 2024 Arintoko Arintoko, Herman Sambodo, Rakhmat Priyono. Published by Nan Yang Academy of Sciences Pte. Ltd..
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
Abstract
Farmers still survive as a livelihood for some of the Indonesian population as the dominant economic sector shifts from agriculture to industry and services. This study investigates the influence of international prices of crude oil, fertilizer, and animal feed ingredients, as well as exchange rates, domestic inflation, agricultural credit, and food production indices on farmers' terms of trade (TOT). The study applies a Nonlinear Autoregressive Distributed Lag model with multiple thresholds. The data used are monthly data for the period January 2010 to October 2023. Through multiple thresholds, the negative impact of world oil prices is significant in the middle level of changes in oil prices on farmers' TOT. Fuel subsidies to farmer households allow the impact of significant changes in oil prices to dampen farmers' TOT. Depreciation of the rupiah exchange rate significantly reduces farmers' TOT. Conversely, appreciation significantly increases farmers' TOT. Domestic inflation has significantly pressured farmers' TOT in the short run, while agricultural credit significantly increased farmers' TOT. The food industry production index significantly encourages an increase in farmers' TOT. The subsidy programs, especially fuel and fertilizer subsidies directly to farmers, are the action to reduce the impact of rising prices of imported crude oil and fertilizer.
Keywords: Farmers’Terms of Trade; Nonlinear Autoregressive Distributed Lag Model; Multiple Thresholds; Asymmetric Effects; Fuel and Fertilizer Subsidies