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The Exchange Rate Misalignment, Volatility and the Export Performance: Evidence from Indonesia

Author

Listed:
  • Deni Kusumawardani

    (Department of Economics, Universitas Airlangga, Surabaya, Indonesia.)

  • M.Khoerul Mubin

    (Department of Economics, Universitas Airlangga, Surabaya, Indonesia.)

Abstract

This study investigates the short-run and long-run impact of real exchange rate misalignment and volatility on Indonesian export to the US by exploiting the disaggregated data of export volume. The proxy of real exchange rate misalignment was obtained by estimating the fundamental equilibrium exchange rate (FEER) model, and the exchange rate volatility measured by employing the GARCH (1,1) model. We employed the ARDL bound test approach to check the existence of long-run equilibrium between export volume and the variable under consideration. Both the short-run estimation using the error correction model and the long-run model indicates that half of the commodities are significantly and positively affected by real exchange rate misalignment. However, only a small number of commodities is significantly affected by the exchange rate volatility.

Suggested Citation

  • Deni Kusumawardani & M.Khoerul Mubin, 2019. "The Exchange Rate Misalignment, Volatility and the Export Performance: Evidence from Indonesia," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 23(3), pages 561-591, Summer.
    • Handle: RePEc:eut:journl:v:23:y:2019:i:3:p:561
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    Cited by:

    1. Mohammad Hassanzadeh & Shahla Mousavi, 2023. "Real effective exchange rate misalignment and currency crisis in Iran," Future Business Journal, Springer, vol. 9(1), pages 1-8, December.
    2. Thareeq Adhi Chandra & Rossanto Dwi Handoyo, 2020. "Determinants of Foreign Direct Investment in 31 Asian Countries for the 2002 - 2017 Period," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 14(4), December.

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