The Terms of Trade Effect on Agriculture Export the Case of Indonesia as a Net Oil Importer Country

Abstract

This study investigates the effects of changes in terms of trade (t.o.t) on economic indicators in net oil-importing countries. Findings demonstrate that improving trade conditions lead to increased profitability, investment opportunities, and capital accumulation, although the pace of accumulation slows down after an initial period of rapid growth. The study also highlights the positive impact of trade terms on foreign debt in developing economies, as enhanced terms of trade contribute to higher export revenues and better capacity to service debt obligations. The study suggests two measures: strengthening domestic energy production and implementing hedging strategies to mitigate the impact of oil price fluctuations on foreign debt. Furthermore, the analysis explores the influence of terms of trade on employment, interest rates, capital costs, net oil imports, final output, and agricultural product exports. These indicators are affected by changes in terms of trade, driven by factors such as increased productivity, shifts in comparative advantage, and market dynamics. Overall, this study emphasizes the significance of terms of trade in shaping economic dynamics and provides insights into policy measures to enhance energy security, reduce oil import dependency, and promote economic resilience in net oil-importing countries.