Trade Policy Evaluation on Rubber and Palm Oil

Abstract

—Rubber and palm oil are the two main export commodities that contribute to economic development in Indonesia. Specific trade policy has to be implemented when export commodity prices fluctuating or increasing or decreasing rapidly in the short period of time. The research purpose is to write a trade policy evaluation on rubber and palm oil using ARMA-ARCH/GARCH and structural time-series model. This study shows that price movement aspect is very important to evaluate the trade policy. The results of the analysis using Autoregressive and Moving Average and Autoregressive Conditional Heteroskedasticity/Generalized Autoregressive Conditional Heteroskedasticity (ARMA-ARCH/GARCH) indicate that past price factors can be used to predict future prices. The Structural Time-Series Model (STSM) shows that the price of rubber and palm oil in 2020 and 2021 is expected to be relatively stable. The relevant trade authorities need to maximize the public services related to the price predictions and upcoming policy in order to maintain export stability in the short and long terms so that it can be utilized to the greatest extent possible for development of Indonesia.