Aggregates and Sectoral 2 Digit Manufacturing Actual, Potential and Output Gap in Indonesia

Most of the current literature focuses on aggregate manufacturing, so if industrialization or deindustrialization has sector-specific components, policies and strategies may not be effective. However, there is currently a dearth of literature addressing diagnosis and developing consistent or integrated analyses related to the components of the manufacturing sub-sector of this process. With the aim of determining whether the typical behavior of aggregate manufacturing occurs at the sub-sectoral level or not, empirically explore the output and growth potential of aggregate manufacturing and sectoral manufacturing in 2 digits in Indonesia. Using time series data from 2000 – 2021 for aggregate and 2010 to 2021 for sectoral, this data exploration also aims to show which manufacturing sub-sectors are following a normal trajectory or premature de-industrialization.
Using the Hodrick-Prescott Filter (HP), Band-Pass Filter (BP), and Growth Accounting Approach methods to estimate potential output and output gaps in Indonesia's industrial sector. After that, a decomposition analysis was carried out which was divided into 5 years adjusting the policy cycle and strategy for the development of the manufacturing industry in Indonesia