This paper analyzes the impact of trade liberalization on the domestic price of industry product by utilizing the structure-conduct-performance (SCP) model. Applying the model to a pooled data of the 3 digits ISIC level of Indonesian industry product, the result shows the abnormal price determination on industry level after the increase of trade liberalization. The existence of this phenomenon, the downward profit-margin rigidity, is indicated by the increase of the profit margin, which reduces the social welfare and tends to persist the inflation. A clear consequence for the Indonesian Central Bank, is to faster and increase the credibility of the middle and long term inflation target, either by clarify the policy signal and its consistency and increase the cooperation with the government.JEL: E31, L11, O24, P23Keyword:Trade liberalization, Structure-Conduct-Performance, Price, Industry

This paper analyze the bank efficiency in Indonesia by deriving the profit function. We apply the stocahstic frontier approach on monthly data during 2001:01 – 2004: 12, covering the 20 largest asset banks. We incorporate the function of the bank as an intermediary institution by including the intermediary stressing variable on the profit function. This is important to capture the possibility when the large profit is gathered from non-operational profit sources such as recap fund or SBI.The result of the study indicate that the average efficiency of the model with intermediary stressing is lower that without intermediary stressing. The 5 largest efficient bank without considering the intermediation stressing, in fact becomes the lowest efficient bank when the model include the intermediary stressing. The findings implies may have a great implication of the Indonesian central policy, when a higher support to real sector is preferred.Keyword: efficiency, profit function, stochastic frontier, bank intermediary, IndonesiaJEL: C52, E51, E58

Sebagaimana diamanatkan oleh UU No.23/1999 tentang Bank Indonesia, tujuan Bank Indonesia adalah mencapai dan memelihara kestabilan nilai Rupiah. Dalam pelaksanaannya, kestabilan nilai Rupiah diterjemahkan dalam suatu tingkat inflasi yang rendah dan tidak berfluktuasi. Sehubungan dengan hal tersebut, dalam memformulasikan kebijakan moneter, Bank Indonesia memerlukan berbagai informasi yang berkaitan baik dengan pembentukan proyeksi variabel-variabel ekonomi maupun dengan proses transmisi kebijakan moneter dalam mempengaruhi perkembangan sektor riil.

The paper is testing the Marshal-Lernercondition and the J-Curvephenomenon on the Indonesian trade. We apply the panel regression model and anlyze the impact of the real depreciation of Rupiah on the trade performance, both in the short run and in the long run.The study indicates the insignificant of the Rupiah real depreciation to boost the export performance in the short run. When the time horizon is long enough, the increase of the export caused by the depreciation, will offset the increase of the import, hence in the long run the real depreciation of Rupiah may significantly increase the trade performance, but still in a small number.The implication is clear for the policy maker; ifthe aim of the policy is to boost the trade performance, then the exchange rate policy should not be an alternative, rather using policy to increase the productivity, efficiency, product quality management, loose tax policy and the creation of the business climate. This includes the industrial re-structuring to lower the import dependences.JEL Classification: C23, F14Keywords: J-Curve, Marshal-Lerner, trade, exchange rate, panel regression