Determinants of Macroeconomic Effects on the Stability of Indonesia’s Foreign Exchange Reserve

Nurus Sa’adah and Sitti Retno Faridatussalam ()
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Nurus Sa’adah: Universitas Muhammadiyah Surakarta, Faculty of Economics and Business
Sitti Retno Faridatussalam: Universitas Muhammadiyah Surakarta, Faculty of Economics and Business

A chapter in Proceedings of the International Conference on Economics and Business Studies (ICOEBS-22-2), 2024, pp 389-400 from Springer

Abstract: Abstract This research aimed to analyze and test the effect of exports, imports, rupiah exchange rates to the dollar, interest rates, inflation, and investment on the stability or state of Indonesia’s foreign exchange reserve. This examination resorts to quantitative methods with the ECM (Error Correction Model) analysis method using the Eviews 9 data processing application. The data from 1997–2021 was sourced from the Statistics Agency and the Central Bank of Indonesia. The calculation of this study using an alpha of 0.05 or 5% is that exports, in the short term, have a positive and significant consequence on Indonesia’s foreign exchange reserve. However, in the long term, exports have a positive but insignificant effect on Indonesia’s foreign exchange reserve. In the short term, Imports have a negative and insignificant effect on Indonesia’s foreign exchange reserve. In contrast, imports have a positive and insignificant effect on Indonesia’s foreign exchange reserve in the long term. The rupiah exchange rate, both in the short- and long-term, has a positive and significant effect on Indonesia’s foreign exchange reserve. Interest rates, both short-term and long-term, have a negative and significant effect on Indonesia’s foreign exchange reserve. Inflation in the short term has a positive and significant effect on Indonesia’s foreign exchange reserve. However, in the long term, inflation negatively and significantly affects Indonesia’s foreign exchange reserve. Short- and long-term foreign investment boosts Indonesia’s foreign exchange reserves.

Keywords: Foreign Exchange Reserves; Export; Import; Exchange Rates; Interest Rates; Inflation; Foreign Direct Investment (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-204-0_33

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DOI: 10.2991/978-94-6463-204-0_33

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