The Volatility of Rupiah Exchange Rate Impact on Main Commodity Exports to the OIC Member States

Rossanto Dwi Handoyo, Agustin Dwi Prihandika Sari, Kabiru Hannafi Ibrahim and Tamat Sarmidi
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Rossanto Dwi Handoyo: Department of Economics, Faculty of Economics and Business, Universitas Airlangga, Surabaya 60286, Indonesia
Agustin Dwi Prihandika Sari: Department of Economics, Faculty of Economics and Business, Universitas Airlangga, Surabaya 60286, Indonesia
Kabiru Hannafi Ibrahim: Department of Economics, Faculty of Social and Management Sciences, Federal University, Birnin Kebbi 860101, Nigeria
Tamat Sarmidi: Department of Economics, Faculty of Economics and Management, Universiti Kebangsaan Malaysia, Bangi 43600, Selangor, Malaysia

Economies, 2022, vol. 10, issue 4, 1-18

Abstract: This study analysed the impact of the volatility of the rupiah exchange rate on four main commodities exported from Indonesia to six member countries of the Organisation of the Islamic Cooperation (OIC) (Saudi Arabia, Malaysia, Pakistan, United Arab Emirates, Turkey, and Bangladesh). The study employed monthly data spanning from January 2007 to December 2019 and the EGARCH method to obtain exchange rate volatility, while the ARDL method was used to model both the short-run and long-run impact of exchange rate and its volatility on exports. In the short term, findings revealed that exchange rate volatility has a significant negative effect on five main commodity exports to OIC countries, whereas, in the long-term, volatility of the exchange rate negatively affects twelve main commodity exports to OIC countries. Our results further imply that most of Indonesia’s exporters to six OIC Member countries are risk-averse.

Keywords: rupiah exchange rate volatility; main export commodities; EGARCH; ARDL model; Indonesia; OIC member countries (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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