INFLUENCE OF EXCHANGE RATE, WORLD INCOME, INTEREST RATES, AND INVESTMENTS IN INDONESIAN EXPORTS

Eka, Sudarusman and Tri Utomo, Prasetyo and Suparmono, Suparmono and Anna, Partina (2021) INFLUENCE OF EXCHANGE RATE, WORLD INCOME, INTEREST RATES, AND INVESTMENTS IN INDONESIAN EXPORTS. Journal of Asian Finance, Economics and Business, 8 (6). pp. 621-628. ISSN 228-4645

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Abstract

This study aims to test the influence of world income, interest rates, and investments on Indonesian exports for the period from 1986 to 2018. We use the Autoregressive Distributed Lag (ARDL) model with Error Correction Mechanism (ECM) version, which can provide long-term impact analysis and short-term dynamic results. The results showed that, in the short run, exchange rate, world income, and investments, respectively, positively affect Indonesian exports, ceteris paribus. These results correspond to the proposed hypotheses. Meanwhile, interest rates also show a positive influence on Indonesian exports in the short run, ceteris paribus, but this direction does not correspond to the research hypotheses. The research also found that there is cointegration between variables. Indonesian export value adjusts the exchange rate, world income, interest rates, and investments with delay, which is a 30.93% difference in long-term and short-term export values corrected. In the long run, world income and investment have a positive effect on exports. This indicates that multinational companies do not solely invest to dominate the domestic market, but they also promote Indonesian exports. Following the results of this research, the increase in FDI will grow exports. Increased exports will certainly increase GDP and ultimately promote economic growth.

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