Short Run Impacts of Trade Liberalisation on the Regional Economy in Indonesia

This paper examines the impact of trade liberalisation on regional and national economies in Indonesia using the computable general equilibrium (CGE) modelling approach. The study found that the liberalisation of Indonesian trade has a positive impact on both regional and national economies. The trade liberalisation improves the performance of regional economies differently in the short run. Tariff reforms would result in an increase in welfare as indicated by the increased real household consumption at both regional and national levels. The liberalisation of trade provides an overall expansion of foreign exports even though it results in significant increases in foreign imports, deterioration in the terms of trade and the worsening of inter-regional trade.