Assessing the Impact of Oil Prices and Interest Rate Policies :The Case of Indonesian Cocoa!)

Indonesia is the third largest cocoa producer in the world after Ivory Coast and the Ghana.Cocoa is strongly considered as an essential commodity. It plays two strategic roles in Indonesian economy. Firstly, cocoa provides export earnings, and secondly, it gives a source of employment for millions of rural smallholders household. However, a number of such policies are implemented by the Indonesian government as oil prices and interest rates, as a controversial issue in the country. These policies are strongly debated and ypothesized to affect the Indonesia cocoa exports and production. By employing an Econometric Time Series Model, this research part analyzes (1) the factors responsible for the Indonesia cocoa demand, (2) assessing the impact of oil prices and interest rates policies on Indonesia cocoa exports and production. To end up, the estimation of the model used 2SLS Method by disaggregating the cocoa production regions into four provinces, namely South Sulawesi, West Sulawesi, Center Sulawesi and East Java. The main findings of the research reveals that; (1) Indonesia cocoa demand is influenced by the Indonesia cocoa price, wage in industrial sector, per capita income and oil prices, (2) an oil prices increasing