Interpretation of The Gravity Model of Natural Rubber Export in International Markets
40 resulting in a decline in the value of exports from the three main exporting
countries. Gross Domestic Product of Importing Countries GDPjt
The GDP of importing countries variable GDPjt has a positive and significant effect on the export value of natural rubber. This is because the
probability value of the variable GDPjt is below a 1 significance level 0.00 0.01. Based on estimates, this variable has a coefficient sign that is consistent
with the hypothesis. The GDPjt variable coefficient is 1.573838, which means that with a 1 increase in GDPjt, the value of natural rubber exports to the destination
countries will increase by 1.573838, ceteris paribus. This occurs because the GDP in importing countries continues to increase and grow, which will drive
increased demand for natural rubber in the long run due to an increase in purchasing power. The GDP growth of each importing country is presented in
Figure 17.
Figure 17 GDP Growth of Importing Countries in 2003 – 2013 Source: Author’s elaboration with data from USDA, 2013
Based on Figure 17, it is known that the average percentage of GDP growth in the importing countries showed positive growth in the period from 2003 to
2012. The growth of GDP in the importing countries will increase the purchasing power and the consumption for a variety of goods and services, including natural
rubber. China is the country with the highest average GDP growth between 2003 and 2012. The average value of real GDP growth in China reached 9.2 per year
at its highest. The increase in China’s real GDP further led to an increase in the value of natural rubber, where the average value of natural rubber exports to
China from the three main exporting countries reached 0.87 billion US in the period between 2003 and 2013.
China is a country that has a strong, positive development in the automotive industry. In 2010, Chinas auto sales reached 18 million units. This figure is the
world record for the highest number of car sales in one country throughout the history of the automobile. The automotive industry is the industry, which most
frequently used the raw material of natural rubber. Moreover, demand is
-10.0 -5.0
0.0 5.0
10.0 15.0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 GDP
gr owth
Year
USA Japan
China Singapore
Rep. Korea Germany
Canada Brazil
India Belgium
41 continually increasing for natural rubber within the automotive industry in order
to meet consumer demand for vehicles CAW, 2011. Real Exchange Rate Erijt
Based on the t-test that was performed for each independent variable, it can be seen that the variable exchange rate erijt has a negative and significant effect
on the natural rubber export value. This is because the probability value of the variable erijt is below a 1 significance level 0.00 0.01. However, based on
the estimation results, this variable has a coefficient sign that is not consistent with the hypothesis. The erijt variable coefficient is -1.383721, which means that
with a 1 increase in the value of the real exchange rate depreciation, the natural rubber export value to the destination country will be reduced by
1.383721, ceteris paribus.
An increase in the real exchange rate, which is commonly referred to as the depreciation of the real exchange rate, is ideally offset by an increase in the
exports of natural rubber. The regression results of the gravity model contradict the theory from Tweeten 1992. Tweeten 1992 states that when the exporting
country’s exchange rate depreciates, then the excess demand will increase so that the exported commodity prices rise in the export market, thus the exporting
countries will increase the volume of exports.
This result is indicative of the fact that for the three countries, exchange rates have developed similarly so that the variable captures an overall trending
behavior. In addition, based on the data, the average real exchange rate has increased depreciated since 2003 1,969 unit to 2008 1,985 unit, with an
average 1,990.43 unit. In the period from 2003 to 2008, the average natural rubber export value from exporting countries to importing countries amounted to 0.238
billion US annually. Between 2009 and 2013, the average real exchange rate actually decreased to 1,765.24 unit, indicating appreciation of the real exchange
rate for the period.
The appreciation of the real exchange rate that occurred between 2009 and 2013 was accompanied by an increase of 0.46 billion US in the average natural
rubber export value. Growth of the natural rubber exports value is an indicator that the natural rubber supply to the destination countries has increased despite
changes in the exchange rate. Furthermore, the presence of excess demand in the importing countries led to the appreciation of the real exchange rate, which
fortunately does not decrease the natural rubber export value from exporting countries.
Remoteness Index Rjt
Based on the t-test performed for each of the four independent variables, it can be determined that only one variable is not significant at the 1 level, this is
the remoteness variable index Rjt. The probability value of the Rjt variable is greater than a 1 significance level 0.462 0.01, which suggests that the change
in the Rjt variable does not affect the natural rubber export value to each importing country. This implies that the multilateral resistance effects seem to be
adequately captured by the exporter and importer fixed effects, and that there impact does not vary too much over time. Additionally, the development of the
automotive industry greatly affects the value of natural rubber exports from the three main exporting countries. China, for example, is the importing country that
42 has the largest natural rubber export value from the three main exporting countries.
Chinas demand for natural rubber is very high, due primarily to the rapid development of the automotive industry, which has grown extensively in recent
years and is now a sector of economic importance for the country.
In 2013, the consumption of natural rubber in China reached roughly 3.314 million tons, which is up 12 from the previous year. Presently, the majority of
natural rubber consumption in China is for tires, shoe materials, hoses, tape, latex products and other rubber products. The rubber consumption of the automobile
tire industry accounts for 70 of the total consumption of natural rubber in China. Of the remaining 30, which is not consumed by the tire industry, the rubber
used in shoe production accounts for approximately one-third. As the automobile tire industry and the downstream natural rubber market develop constantly, the
demand for rubber will continue in an upward trend. It is estimated that the consumption of natural rubber in China will reach 3.51 million tons by the end of
2014, and 4.52 million tons by 2018 with a growth rate of 6.5 annually. While the rapid development of the automotive industry will lead to an increase in the
demand natural rubber, so the exporting countries will still be able to meet the demand for natural rubber despite the high value of the remoteness index. It can
be concluded that the remoteness variable does not affect the natural rubber export value in the international market due to the high demand of consumer countries.
7 CONCLUSIONS AND POLICY IMPLICATIONS