Title: Impact of exchange rates on exports from Indonesia's sub-national economies: an empirical analysis

Authors: Khee Giap Tan; Mulya Amri; Nursyahida Ahmad

Addresses: Asia Competitiveness Institute (ACI), Lee Kuan Yew School of Public Policy, National University of Singapore, Singapore ' Asia Competitiveness Institute (ACI), Lee Kuan Yew School of Public Policy, National University of Singapore, Singapore ' Asia Competitiveness Institute (ACI), Lee Kuan Yew School of Public Policy, National University of Singapore, Singapore

Abstract: This paper presents an examination of the impact of Indonesia's cost competitiveness, broadly represented by the country's real effective exchange rate (REER), on the value of exports from Indonesia's provinces. Our focus on Indonesia is intended to fill the knowledge gap on the world's 16th largest economy and fourth most populous country, where decentralisation efforts have resulted in increasing exports from its peripheral regions. Using panel fixed-effects model on provincial exports data covering 2000 to 2013, we find that exchange rate depreciation is positively and significantly associated with provincial exports, and exchange rate volatility tends to be negatively associated with exports. This implies that the export performance of a province depends upon not just managing cost competitiveness through the exchange rate regime but also other economic considerations such as the relative competitiveness of the provinces.

Keywords: Indonesia; provincial exports; exchange rate; competitiveness.

DOI: 10.1504/IJEPEE.2020.107927

International Journal of Economic Policy in Emerging Economies, 2020 Vol.13 No.2, pp.85 - 106

Received: 05 Oct 2018
Accepted: 11 Jun 2019
Published online: 30 Jun 2020 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article