Estimation of Demand for Beef Imports in Indonesia: An Autoregressive Distributed Lag (ARDL) Approach

Abstract

Import policies for food products, including beef, need to support national food security while protecting the domestic food industry. This study aims to develop a model for beef import demand of Indonesia. The study employed annual secondary data from various sources from 1990 to 2019. Autoregressive distributed lag (ARDL) and the error correction models (ECM) were adapted for predicting the long-run and short-run beef import demand, by considering income growth, domestic production, relative price, and exchange rate. The bounds test showed that gross domestic product (GDP) growth per capita, domestic beef production, and the exchange rate had no significant effect on the beef import demand in the long run; nonetheless, the relative beef price between local and international market had a considerable impact (5.353%). In the short run, GDP growth per capita and domestic beef production significantly affected beef import demand (0.036% and −0.9%, respectively). Error correction term (ECT) corrected the disequilibrium of the import demand model in current year towards the following year (17.60%). This finding is confirmed by the fully modified ordinary least squares (FMOLS), dynamic ordinary least squares (DOLS), and canonical co-integrating regression (CCR) methods. Ultimately, this study can serve as an instrument for formulating policy related to beef imports in Indonesia.