Exchange Rate Volatility, Monetary Conditions, and Trade Performance in Indonesia

Tony Seno Aji; Aminudin Ma’ruf; Ladi Wajuba Perdini Fisabilillah; Safa Kharisma; Nico Irawan

doi:10.55927/ijbae.v4i6.516

Authors

Tony Seno Aji Universitas Negeri Surabaya
Aminudin Ma’ruf Universitas Negeri Surabaya
Ladi Wajuba Perdini Fisabilillah Universitas Negeri Surabaya
Safa Kharisma Universitas Negeri Surabaya
Nico Irawan Thai Global Business Administration Technological College

DOI:

https://doi.org/10.55927/ijbae.v4i6.516

Keywords:

Trade, Inflation, Exchange Rate, Economic Growth

Abstract

This study aims to analyse the short-term and long-term relationships and causal directions between the main macroeconomic variables and Indonesia's trade performance. Using annual time series data from 1975 - 2023 from the World Bank, using the ARDL method and the Granger causality test. These findings reveal complex dynamics, in the long run, inflation, economic growth, and money supply have a significant positive effect on trade. However, in the short term, exchange rate volatility has a significant negative impact, the depreciation of the Rupiah in the previous one to two years depresses current trading performance. The Granger causality test shows one-way causality from inflation to trade and from exchange rate to trade, as well as two-way causality between inflation and exchange rates. The implications of this study provide a strategic basis for the formulation of Indonesia's monetary and trade policy.

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