THE RELATIONSHIP BETWEEN EXCHANGE RATE, INTERNATIONAL TRADE, AND INFLATION IN INDONESIA
DOI:
https://doi.org/10.24071/icebmr.v4i1.69Keywords:
Exchange rate, Inflation, International trade, Indonesia, EconometricsAbstract
This study analyzes the relationship between Indonesia's Rupiah exchange rate against the US Dollar, international trade, and inflation. The research is motivated by the sensitivity of domestic inflation to Rupiah depreciation and trade dynamics amid macroeconomic shocks. The methodology employs multiple linear regression using annual data from BPS and Bank Indonesia. These findings support the model's validity in testing the hypotheses on the impact of exchange rate and trade on inflation. Theoretically, exchange rates and international trade have a significant effect on inflation simultaneously. Meanwhile, partially, the exchange rate has a negative and significant impact on inflation. However, on the other hand, international trade has a limited effect on inflation in Indonesia. Policy implications emphasise the stabilisation of exchange rates, strengthening resilience in imported raw materials, and the coordination of monetary and fiscal policies.
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Copyright (c) 2025 Stephanie Mora Atmajani Santoso, Nathania Crisan Belva Elveretta, Emanuela Yovita, Lisa Kusuma Dewi, Annisa Noviana Moi (Author)
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