The aim of this study is to examine the short-term and long-term relationship explain the shock of the real exchange rate in Indonesia. The analysis model is used cointegration of Johansen-juselius and error correction model (ECM). Data is used by time series from 1982 to 2017. The findings of this study found that trade openness, current account balance, and inflation significantly affected the real exchange rate. In the short term, inflation and foreign investment caused real exchange rate shocks in Indonesia directly. It is thus recommended amongst others that policies have to be put in place to stabilize the problem of inflation
This study aims to analyze the short-term and long-term relationships between macroeconomic variables and the flow of Foreign Direct Investment (FDI) in Indonesia from 1982 to 2021. The analysis model used is johansen-juselius co-integration and error correction model (ECM. This study found a cointegration relationship between macroeconomic variables and FDI inflows. Money supply is a factor that influences FDI inflows in the short and long term. Meanwhile, inflation and trade openness have a negative effect in the long term. Market size affects FDI inflows only in the short term. This finding has implications that the government needs to maintain the stability of macroeconomic variables to increase FDI inflows.
This study investigates the determinants and causality between economic openness and real exchange rates in Indonesia and the Philippines. This study uses time series from 1970 up to 2017 and the cross section is 2 countries (Indonesia and Philippines) using a simultaneous equation model panel. Indonesia has a low level of economic openness and high fluctuations in the real exchange rate, while the Philippines has a high level of economic openness and low real exchange rate fluctuations.The important findings in this study are; First, economic openness in Indonesia is positively influenced by terms of trade and inflation, while in the Philippines it is positively affected by terms of trade and real exchange rates; Second, the strength of real exchange rates in Indonesia is positively influenced by money supply, net foreign assets, and economic openness, besides that it is negatively affected by inflation, while in the Philippines it is positively affected by the money supply; Third, economic opennes that affect the real exchange rate in Indonesia and the real exchange rate that affects the economic openness in the Philippines. Based on this, the Philippines is used as a reference to improve the conditions of economic openness and fluctuations in the real exchange rate in Indonesia so that Indonesia can improve the conditions of economic openness and control the fluctuations in the real exchange rate.
The important findings in this study are; First, economic openness in Indonesia is positively influenced by terms of trade and inflation, while in the Philippines it is positively affected by terms of trade and real exchange rates; Second, the strength of real exchange rates in Indonesia is positively influenced by money supply, net foreign assets, and economic openness, besides that it is negatively affected by inflation, while in the Philippines it is positively affected by the money supply; Third, economic opennes that affect the real exchange rate in Indonesia and the real exchange rate that affects the economic openness in the Philippines.
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