DYNAMIC EFFECTS OF EXCHANGE RATE, TRADE BALANCE, AND FINANCIAL DEVELOPMENT ON EXPORTS IN INDONESIA: AN ARDL APPROACH

Abstrak

This study examines the effects of exchange rate, trade balance, and financial development on exports in Indonesia. The data for this study were extracted from the World Bank’s World Development Indicators from 1980 to 2023. The data consists of annual time series data for Indonesia. This study employs the ARDL bounds testing approach for cointegration to estimate the short- and long-run effect of exchange rate, trade balance, and financial development on exports in Indonesia. Empirical findings confirm that exchange rate, trade balance, and financial development have a substantial impact on exports in Indonesia in both the long and short term. In line with these findings, this study recommends that government policies should focus on encouraging stable exchange rate volatility and financial development in the long term to increase export revenues. Efforts to encourage long-term financial openness are also needed, including in the form of encouraging increased foreign investment.