Research
[JMP] Commodity Booms and Busts and Investment Inefficiency
This paper examines firms' investment inefficiency across sectors in a resource-rich country during commodity boom and bust periods. Understanding the effect of commodity price fluctuations on investments is essential to understanding the transmission channel of commodity price shocks to the economy. This paper looks at the prevalence of firms' investment inefficiency (particularly overinvestment) across sectors and at the role of commodity price fluctuations in driving the overinvestment. Subsequently, it examines the consequence of overinvestment during the boom period on firms' financial performance in the bust period. The data is panel data of Indonesian listed firms between the 1990s and 2019. The empirical result shows that commodity price growth increases the likelihood of firms' overinvestment in the resource sector and, to some extent, in the service sector. A one standard deviation increase in commodity price increases the probability of overinvestment in the resource sector by around 20 percent during the boom period. However, the effect of commodity price growth on overinvestment declined during a higher volatility period. In addition, overinvested firms tend to have weaker financial performance in the subsequent bust periods. The commodity price boom is likely to trigger overinvestment in resource firms through an increase in free cash flow and lower cost of external financing.
Other ongoing projects
Macro-financial Linkages following Commodity Price Shocks
Commodity Booms and Manufacturing Sector
Asymmetries in the Buffering Role of Exchange Rate Flexibility
Commodity Prices and Debt in Commodity Exporting Countries.
Past projects
ERIA East Asia Update: December 2017, March 2018, June 2018, October 2018, and December 2018 Edition.
Non-Tariff Measures in ASEAN 2040 (with Lili Yan Ing), a chapter in Intal, P. and M. Pangestu, Integrated and Connected Seamless ASEAN Economic Community, 2019, Jakarta, ERIA, pp. 34–49.
Indonesia’s Manufacturing Export Competitiveness Post AFC 1997/1998: A Unit Labor Cost Analysis, a chapter in the Indonesian Economy: Trade and Industrial Policies, Routledge.
Framing the ASEAN Socio-Cultural Community Post-2015, 2015, co-editor, Jakarta, ERIA.
AEC Blueprint Implementation Performance and Challenges: Standards and Conformance (with Ponciano Intal, Jr.), 2015, ERIA Discussion Paper Series.
Google Scholar profile.