The Impact Of CAFTA Implementation On Indonesia-China Bilateral Balance Of Trade

The presence of the Free Trade Area in one country can influence directly or indirectly to its macroeconomic condition.The China-ASEAN Free Trade Area(CAFTA)was legally implemented starting from January 1,2010,but its impact can be seen before it legally implemented.The aim of this study is to know the impact of the China-ASEAN Free Trade Area(CAFTA)on Indonesia-China bilateral Balance of Trade in the long term and the short term.This study uses time series data from 2004 to 2015(quarterly basis)with the method of Error Correction Model(ECM),that been divided into two period,before CAFTA implementation(2004-2009)and after CAFTA implementation(2010—2015).Therefore,there are two models of regression in this study.This study specifically uses the variable of RER,FDI and GDP as independent variables to examine its impact on Indonesia—China bilateral Balance of Trade.