Exchange rate shocks and food security in Indonesia (1990–2024): evidence from a Vector Error Correction
Year: 2026
Type: article
Abstract: Indonesia’s reliance on food imports has intensified food-security concerns amid exchange-rate volatility and global trade disruptions. This study analyzes the dynamic relationship between food security and key macroeconomic variables—food imports, inflation, population growth, exchange rates, and GDP per capita—using a Vector Error Correction Model (VECM) applied to annual Indonesian data from 1990 to 2024. Cointegration results confirm the existence of long-run equilibrium relationship, while the error-correction term indicates gradual adjustment toward equilibrium following shocks. The estimates show that exchange-rate depreciation exerts the most economically significant and persistent long-run effect on the Food Security Index, reflecting strong price pass-through mechanisms. In contrast, food imports, population, and income influence short-run adjustment dynamics but do not dominate long-run equilibrium outcomes, consistent with buffer-stock and Boserupian adjustment mechanisms. Impulse response functions and forecast error variance decomposition further demonstrate that exchange-rate shocks increasingly account for food-security variability over time. These findings support a ‘monetary-dominant food-security’ perspective in which price channels outweigh quantity channels in import-dependent economies. Policy implications emphasize prioritizing exchange-rate stability and macroeconomic coordination in the short-run, alongside long-term investment in agricultural productivity, supply-chain resilience, and targeted food-assistance mechanisms.
Source: Cogent Economics & Finance
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: gold
Estimated APC paid: $1,165
OpenAlex ID: W7136226657