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The Exchange Rate Volatility And Export Performance: The Case Of Indonesia’S Exports To Japan And Us

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  • Shinta Fitriani

    (Bank Indonesia)

Abstract

This paper investigates the long-run and short-run impacts of the exchange rate volatility on Indonesia’s real exports to its major trading partners; Japan and US. The study uses monthly data from January 1998 to October 2015 in order to capture the structural break period of the Global Financial Crisis 2008. In addition, commodity price is included as an explanatory variable. The index of exchange rate volatility is generated using moving sample standard deviation of the growth of the real exchange rate. This paper estimates the long-run cointegration using Autoregressive Distributed Lag (ARDL) bounds testing, while for the short-run dynamic this paper use error-correction-model (ECM). The findings suggest rupiah volatility against the Japanese yen reduces Indonesia’s export to Japan, both in the short and the long-run. Fluctuation of rupiah against the US dollar helps Indonesia’s export to the US in the short run, but the impact is not carried out to the long-run. On the other hand, the impact of commodity price shock is negligible, except for the long-run export to Japan.

Suggested Citation

  • Shinta Fitriani, 2017. "The Exchange Rate Volatility And Export Performance: The Case Of Indonesia’S Exports To Japan And Us," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 20(1), pages 49-70, July.
    • Handle: RePEc:idn:journl:v:20:y:2017:i:1b:p:49-70
    DOI: https://doi.org/10.21098/bemp.v20i1.724
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    References listed on IDEAS

    as
    1. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    2. Jeffrey A Frankel & Andrew K Rose, 2010. "Determinants of Agricultural and Mineral Commodity Prices," RBA Annual Conference Volume (Discontinued), in: Renée Fry & Callum Jones & Christopher Kent (ed.),Inflation in an Era of Relative Price Shocks, Reserve Bank of Australia.
    3. Perry Warjiyo, 2013. "Indonesia: stabilizing the exchange rate along its fundamental," BIS Papers chapters, in: Bank for International Settlements (ed.), Sovereign risk: a world without risk-free assets?, volume 73, pages 177-187, Bank for International Settlements.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    ARDL Bounds Testing; Export; Exchange Rate Volatility; Indonesia;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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