Analysis of oil price, trade openness and business cycle on exchange rate in Indonesia
DOI:
https://doi.org/10.18196/jesp.v25i2.24620Keywords:
Oil Price, Trade Openness, Business Cycle, Exchange Rate, ARDLAbstract
The importance of exchange rate stability in achieving macroeconomic policy objec-tives cannot be ignored by developed or developing countries, including Indonesia. The adaptability of exchange rate management policies in achieving the macroeco-nomic policy goals is a testament to the resilience of the system. However, exchange rate stability cannot occur by itself, it depends on macroeconomic conditions. The research applies the ARDL method to analyze the short and long term influence of macroeconomic variables on exchange rates. The research results show that oil pric-es have a negative and significant impact on the rupiah exchange rate in the long term, while trade openness has no effect in the short and long term. The ARDL model consistently shows the negative influence of business cycle variables on ex-change rates in the short and long term.The implication of the research is that maintaining the stability of domestic macroeconomic conditions through increasing people's purchasing power, encouraging exports and export diversification, especial-ly in the manufacturing sector, which not only has a large multiplier effect in ab-sorbing labor but also can be a significant tool for stabilizing the exchange rate.
References
Afriyanti, N., & Prasetiyo, L. (2021). Pengaruh inflasi dan pertumbuhan ekonomi terhadap nilai tukar rupiah dalam jangka pendek dan jangka panjang tahun 2010-2018. Journal of Islamic Economics, 1(1), 24-40. https://doi.org/10.21154/joie.v1i1.3081
Andersson, M., Masuch, K., & Schiffbauer, M. (2009). Determinants of Inflation and Price Level Differentials Across the Euro Area Countries. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.1519943
Arifin, S., & Mayasya, S. (2018). Faktor-faktor yang mempengaruhi nilai tukar rupiah terhadap dolar Amerika Serikat. Jurnal Ekonomi-Qu, 8(1), 82-96. https://doi.org/10.35448/jequ.v8i1.4965
Basri, M. C., & Sumartono, L. (2023). The impossibility of the impossible trinity? The case of Indonesia. Oxford Review of Economic Policy, 39(2), 341-355. https://doi.org/10.1093/oxrep/grad010
Baxter, M., & Stockman, A. C. (1989). Business cycles and the exchange-rate regime: Some international evidence. Journal of Monetary Economics, 23(3), 377-400. https://doi.org/10.1016/0304-3932(89)90039-1
Calderón, C., & Kubota, M. (2018). Does higher openness cause more real exchange rate volatility? Journal of International Economics, 110, 176-204. https://doi.org/10.1016/j.jinteco.2017.08.002
Carissa, N., & Khoirudin, R. (2020). The factors affecting the rupiah exchange rate in Indonesia. Jurnal Ekonomi Pembangunan, 18(1), 37-46. https://doi.org/10.29259/jep.v18i1.9826
Cheikh, N. Ben, Zaied, Y. Ben, Bouzgarrou, H., & Nguyen, P. (2018). Nonliniear exchange rate pass-through: Does business cycle matter? Journal of Economic Integration, 33(2), 1234-1261. https://doi.org/10.11130/jei.2018.33.2.1235
Chinn, M. D. (2008). Non-linearities, business cycles and exchange rates. Economic Notes, 37(3), 219-239. https://doi.org/10.1111/j.1468-0300.2008.00199.x
Christiano, L. J., Eichenbaum, M., & Evans, C. L. (1999). Monetary policy shocks: What we have learned and to what end? Handbook of Macroeconomics, 1, 65-148. https://doi.org/10.1016/S1574-0048(99)01005-8
Christiano, L. J., & Fitzgerald, T. J. (2003). The band pass filter. International Economic Review, 4(2), 435-465. https://doi.org/10.1111/1468-2354.t01-1-00076
De, K. (2024). Asymmetric Shocks and the Role of Exchange Rate in Emerging Markets: Evidence from India. Open Economies Review, 36(2), 607–649. https://doi.org/10.1007/s11079-024-09773-6
Frankel, J. A., & Rose, A. K. (1996). The Endogeneity of the Optimum Currency Area Criteria. National Bureau of Economic Research. https://doi.org/10.3386/w5700
Hakim, N., & Pangestuti, I. R. D. (2013). Pengaruh produk domestik bruto, jumlah uang beredar, inflasi, current account, financial account, dan harga minyak dunia terhadap kurs rupiah per dolar Amerika Serikat tahun 2002-2012. Diponegoro Journal of Management, 2(3), 1-12. https://ejournal3.undip.ac.id/index.php/djom/article/view/9042
Hau, H. (2002). Real exchange rate volatility and economic openness: Theory and evidence. Journal of Money, Credit and Banking, 34(3), 611-630. https://doi.org/10.1353/mcb.2002.0002
Hodijah, S. (2015). Analisis penanaman modal asing di Indonesia dan pengaruhnya terhadap nilai tukar rupiah. Jurnal Paradigma Ekonomi, 10(2), 350-362. https://doi.org/10.22437/paradigma.v10i2.3680
Iacobucci, A., & Noullez, A. (2005). A frequency selective filter for short-length time series. Computational Economics, 25(1-2), 75-102. https://doi.org/10.1007/s10614-005-6276-7
Jašová, M., Moessner, R., & Takáts, E. (2016). Exchange rate pass-through: What has changed since the crisis? (No. 583; BIS Working Papers).
Jebeniani, J., & Trabelsi, J. (2022). Effects of the business cycle on real exchange rate misalignments with respect to exchange rate regimes. International Economics, 170, 92-102. https://doi.org/10.1016/j.inteco.2022.02.009
Kacaribu, F., Sabrina, S., & Hasan, T. M. R. (2021). Does the service trade openness mitigate real exchange rate volatility. Bulletin of Monetary Economics and Banking, 24(2), 1-18. https://doi.org/10.21098/bemp.v24i2.1168
Kano, T. (2024). Trend inflation and exchange rate dynamics: A new Keynesian approach. Journal of International Money and Finance, 146, 103128. https://doi.org/10.1016/j.jimonfin.2024.103128
Kim Lien, N. T., Doan, T.-T. T., & Bui, T. N. (2022). Trade openness and real effective exchange rate volatility: The case of Vietnam. Banks and Bank Systems, 17(1), 150-160. https://doi.org/10.21511/bbs.17(1).2022.13
Kisswani, K. M., & Fikru, M. G. (2023). A Review of Econometric Approaches for the Oil Price-Exchange Rate Nexus: Lessons for ASEAN-5 Countries. Energies, 16(9), 3839. https://doi.org/10.3390/en16093839
Kurniawan, M. L. A., A'yun, I. Q., & Perwithosuci, W. (2022). Money demand in Indonesia: Does economic uncertainty matter? Jurnal Ekonomi & Studi Pembangunan, 23(2), 231-244. https://doi.org/10.18196/jesp.v23i2.15876
Kurniawan, M. L. A., & Khasanah, U. (2023). Determinant of property price through the monetary variables: An ARDL approach. Jurnal Ekonomi Pembangunan: Kajian Masalah Ekonomi dan Pembangunan, 24(1), 12-23. https://doi.org/10.23917/jep.v24i1.20588
Kurniawan, M. L. A., & Prawoto, N. (2014). Pertumbuhan ekonomi dan penentuan titik ambang batas inflasi di Indonesia. Jurnal Ekonomi & Studi Pembangunan, 15(1), 71-77. https://journal.umy.ac.id/index.php/esp/article/view/1263
McCarthy, J. (2007). Pass-through of exchange rates and import prices to domestic inflation in some industrialized economies. Eastern Economic Journal, 33(4), 511-537. https://doi.org/10.1057/eej.2007.38
Melati, I., & Kurniawan, M. L. A. (2023). Money demand analysis through business cycle in Indonesia. Ekuilibrium: Jurnal Ilmiah Bidang Ilmu Ekonomi, 18(2), 203-212. https://doi.org/10.24269/ekuilibrium.v18i2.2023.pp203-212
Melike, E. B., & Selçuk, A. (2012). Measurement of filters' efficiencies and application of NNSFDI method. Economic Research-Ekonomska Istraživanja, 25(4), 937-958. https://doi.org/10.1080/1331677X.2012.11517540
Menzie, D. C. (2008). Non-linearities, business cycle and exchange rates. Economic Notes, 37(3), 219-239. https://doi.org/10.1111/j.1468-0300.2008.00199.x
Miteza, I., Tanku, A., & Vika, I. (2023). Is the floating exchange rate a shock absorber in Albania? Evidence from SVAR models. Economic Change and Restructuring, 56(2), 1297-1326. https://doi.org/10.1007/s10644-022-09471-8
Musa, K. S., Maijama'a, R., Muhammed, N., & Usman, A. (2020). Crude Oil Price and Exchange Rate Nexus: An Ardl Bound Approach. OALib, 7(3), 1–24. https://doi.org/10.4236/oalib.1106072
Nandi, B. K., Kabir, M. H., & Nandi, M. K. (2024). Crude oil price hikes and exchange rate volatility: A lesson from the Bangladesh economy. Resources Policy, 91, 104858. https://doi.org/10.1016/j.resourpol.2024.104858
Neaime, S., & Gaysset, I. (2023). Egypt's currency and financial crisis. Elgar Encyclopedia of Financial Crises, 118-120. https://doi.org/10.4337/9781800377363.ch28
Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289-326. https://doi.org/10.1002/jae.616
Prasetyawan, A. (2016). Analisis pengaruh investasi asing langsung, investasi portofolio dan remitansi terhadap nilai tukar rupiah di Indonesia periode 2008-2015. Jurnal Ilmiah Mahasiswa FEB Universitas Brawijaya, 5(1).
Pratiwik, E., & Prajanti, S. D. W. (2023). Rupiah exchange rate: the determinants and impact of shocks on the economy. Jurnal Ekonomi & Studi Pembangunan, 24(1), 100-126. https://doi.org/10.18196/jesp.v24i1.18016
Safitri, S. T., Mutiara, N., & Srihastuti, E. (2021). Exploration exogenous factor of exchange rate: Data from Indonesia. Jurnal Inovasi Ekonomi, 6(1), 21-24. https://doi.org/10.22219/jiko.v6i01.16610
Salim, T., & Soelistyo, A. (2024). Analysis of exchange rates in the economic uncertainty era. Optimum: Jurnal Ekonomi dan Pembangunan, 14(1), 82-94. https://doi.org/10.12928/optimum.v14i1.9750
Seftarita, C., Ferayanti, Fitriyani, & Diana, A. (2020). Fiscal and Monetary Policy, Trade Openness, and its Impact on Indonesian Exchange Rate. 2020 International Conference on Decision Aid Sciences and Application (DASA), 1064–1067. https://doi.org/10.1109/dasa51403.2020.9317012
Silitonga, R. B., Ishak, Z., & Mukhlis. (2017). Pengaruh ekspor, impor dan inflasi terhadap nilai tukar rupiah di Indonesia. Jurnal Ekonomi Pembangunan, 15(1), 53-59. https://doi.org/10.29259/jep.v15i1.8821
Taiwo, A., & Olalekan, O. C. (2021). Trade openness, institutions and economic growth in Sub-Saharan Africa. Jurnal Perspektif Pembiayaan Dan Pembangunan Daerah, 8(6), 541-560. https://doi.org/10.22437/ppd.v8i6.10653
Warjiyo, P. (2005). Changing perspectives on exchange rates: Theory and policy implications. Bulletin Ekonomi Moneter Dan Perbankan, 8(3), 1-17. https://doi.org/10.21098/bemp.v8i3.138
Warjiyo, P. (2013). Indonesia: Stabilizing the exchange rate along its fundamental (BIS Paper No. 73m).
Yang, Y., & Liu, W. (2024). Free trade agreements and domestic value added in exports: An analysis from the network perspective. Economic Modelling, 132, 106656. https://doi.org/10.1016/j.econmod.2024.106656
Zorgati, M. B. S. (2023). Zorgati, M. B. S. (2023). Risk Measure between Exchange Rate and Oil Price during Crises: Evidence from Oil-Importing and Oil-Exporting Countries. Journal of Risk and Financial Management, 16(4), 250. https://doi.org/10.3390/jrfm16040250
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2024 Mahrus Lutfi Adi Kurniawan, Cahyo Trianto, Suripto Suripto
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
License
You are free to:
- Share — copy and redistribute the material in any medium or format
- Adapt — remix, transform, and build upon the material for any purpose, even commercially.
The licensor cannot revoke these freedoms as long as you follow the license terms.
Under the following terms:
- Attribution — You must give appropriate credit, provide a link to the license, and indicate if changes were made. You may do so in any reasonable manner, but not in any way that suggests the licensor endorses you or your use.
- ShareAlike — If you remix, transform, or build upon the material, you must distribute your contributions under the same license as the original.
- No additional restrictions — You may not apply legal terms or technological measures that legally restrict others from doing anything the license permits.
Creative Commons License
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
