Indonesia

An econometric model of the world market for natural rubber is presented. The behavioral equations of the model can be grouped into three major blocks: supply, demand... Show More + for all elastomers, and demand for natural rubber. Individual supply equations were estimated for Malaysia, Indonesia, and Thailand, the three major rubber-producing countries. An additional equation captures the production of rubber in all other countries. The equations provide for adjustment by natural rubber users of their consumption in response to changes in relative prices and technology and to obtain estimates for short- and long-term elasticities in the market share of natural rubber with respect to relative prices. Simulation results show that a model captures that past behavior of the natural rubber market quite well. Use of the model to assess the future indicates that: (1) economic growth in major rubber consuming countries is the key variable for determining rubber demand; (2) the oil crisis has altered the structure of elastomer demand so that the link between GNP and elastomer demand is changing; and (3) gradual reduction of historical income elasticity coefficients points to a continuation in the strong market for natural rubber. Show Less -