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Demand and Strategy of Imports in Declining Foreign Exchange Reserves

Sri Indah Nikensari, Puspitasari Nfd and Amin Pujiati

International Journal of Economics & Business Administration (IJEBA), 2020, vol. VIII, issue 3, 96-110

Abstract: Purpose: The purpose of this study is to propose alternative ideas of import strategy related to the needs of imports to increase economic growth, compare with the availability of foreign exchange reserves. Design/Methodology/Appoach: This paper proposes possible alternative ideas for import strategies, after examining what factors influence imports. Policies at the international and regional levels are considered in formulating simple ideas for solving problems. Document analysis, as a form of qualitative research, is also used in this study. To answer the question, data from ASEAN countries in the 2012-2018 period were used, which were analyzed using panel data regression equations. Findings: We found that GDP and foreign exchange reserves (FER) have the highest influence on import demand compared to other variables, but the significance of FER is greater than of GDP. Because there is a downward trend in FER in several ASEAN countries, the paper proposes the use of a protective import strategy consisting of a strategy of cooperation (negotiation and renegotiation) and non-cooperation (unilateral decision) to maintain sustainable imports. Practical Implications: The decline in FER will have an impact on the country's ability to import. Protective strategies, both through cooperation and non-cooperation, can reduce the current account deficit. The protective strategy will also grow the domestic economy, starting from the growth of the domestic industry, reducing unemployment, increasing people's income.

Keywords: Imports demand; GDP; forex reserve; imports strategy. (search for similar items in EconPapers)
JEL-codes: F14 F31 F47 F55 (search for similar items in EconPapers)
Date: 2020
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Handle: RePEc:ers:ijebaa:v:viii:y:2020:i:3:p:96-110