Macroeconomics shocks and food prices in Indonesia

The objective of the paper is to analyze empirically the relative explanatory power of measures of macroeconomic shocks in explaining movements of food prices in Indonesia by utilizing the Error Correction Model (ECM).  While macroeconomic shocks have been known to play important roles in the pursuit of price stabilization both in developed and developing countries and many researchers have attempted to examine the impacts of the shocks on various aggregates using different techniques, but the results remains to be one of the most debated and tested issues in macroeconomics. The contribution of the paper is two-fold.  First, since there is a lack of coherent analytical framework in assessing the issue in the case of Indonesia, combine with diversities and experiences of macroeconomic shocks in many developing countries, this paper contributes to the existing empirical literature through its analysis covering a specific developing country study and providing analysis based on the recent evidence and experience.  Second, the result of this paper will be helpful in facilitating the policy discussions on the effects of macroeconomic factors on the dynamics of food prices in Indonesia.