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The Effect of Intervening Variable towards Twin Defcit in Indonesia: The Application of Path Analysis


contributor author Erni Ummi Hasanah, JJ Sarungu, AM Soesilo
date accessioned Thu, 26 February 2026
date available Thu, 26 February 2026
date issued Selasa, 31 Desember 2019
description abstract This study examines twin defcits in Indonesia during the period of 1969-2015 using Path Analysis. Path analysis can test the direct and indirect effect of the variables studied and simultaneously identify the role of the intervening variables. Data used in this study include government budget defcit (BD) as the exogenous variable, interest rate (IR) and domestic exchange rate (FER) as the endogenous intervening variables, and defcit on the current account of balance of payment (DBOP) as the endogenous variable. This study found no direct effect between BD and DBOP. The fnding indicates that an increase in budget defcit may not necessarily lead to an increase in current account defcits, and therefore do not prove twin defcits in Indonesia. Therefore, Mundell-Fleming’s theory in Indonesia is not applicable because the role of intervening variables (IR and FER) in mediating twin defcits is relatively weak.
subject The Effect of Intervening Variable towards Twin Defcit in Indonesia: The Application of Path Analysis
title The Effect of Intervening Variable towards Twin Defcit in Indonesia: The Application of Path Analysis
type

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