The Effect of Exchange Rate Volatility on Indonesia’s Top 5 Export Countries in 2015-2022

Yulita Dheta Nawangsari, Grisvia Agustin

Abstract


Abstract: Using quarterly panel data, this research examines the effects of the Industrial Production Index (IIP), the Real Effective Exchange Rate (REER), and REER volatility on Indonesia's non-oil and gas exports to its five major trade partners between 2015 and 2022. The findings of panel data regression using the Fixed Effect Model show that exports are significantly positively impacted by both the IIP and the CPI (Consumer Price Index). Nevertheless, REER shows a positive but insignificant effect, while REER volatility negatively impacts exports. It is recommended that Bank Indonesia maintains a free-floating exchange rate system to support international trade stability and growth.

Keywords: Export, Index Industrial Production (IIP), Real Effective Exchange Rate (REER) and Volatility of REER.

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