DETERMINANTS OF THE BALANCE OF PAYMENTS IN INDONESIA: A SHARIA ECONOMIC PERSPECTIVE

Indonesia, as a nation that heavily relies on commodity exports, experiences notable impacts from exchange rate fluctuations in its efforts to maintain a stable balance of payments (BOP). This study seeks to analyze the influence of several macroeconomic variables specifically, the exchange rate, reference coal price (HBA), foreign exchange reserves, and gross domestic product (GDP) on Indonesia's balance of payments, particularly within the timeframe of 2013 to 2024. The research delves into the external economic vulnerabilities faced by Indonesia in light of global coal price dynamics and currency volatility. Utilizing a quantitative methodology, the study employs multiple linear regression analysis facilitated by EViews and Jamovi software, relying on time series data sourced from credible national and international sources. The findings indicate that, out of the four independent variables examined, only foreign exchange reserves demonstrate a statistically significant and positive impact on the balance of payments, underscoring their vital role in stabilizing the external sector. Conversely, the exchange rate, coal price, and GDP do not reveal significant individual effects. This research offers original insights into the stabilization of macroeconomic conditions in commodity-dependent economies and emphasizes the importance of strategic reserve management in mitigating balance of payments instability.

The evolution of the global energy landscape has established liquefied natural gas (LNG) as a critical component of the worldwide energy mix. Nonetheless, instability in global LNG prices presents significant challenges, particularly for export dependent nations like Indonesia. This study rigorously quantifies the impact of LNG price volatility on Indonesia’s Balance of Payments (BOP) and subsequently proposes strategic policies to bolster national economic resilience. Utilizing a mixed-methods design, the research integrates advanced time-series econometric modeling specifically Vector Autoregression (VAR) and Impulse Response Function (IRF) analysis with a qualitative policy review spanning the period 2015–2024. Data include monthly LNG indices, BOP components, and macroeconomic controls, sourced from authoritative institutions such as the International Energy Agency (IEA, 2024), Bank Indonesia (2024), and the Ministry of Energy and Mineral Resources (2024). The empirical results demonstrate a significant, adverse effect of LNG price shocks on Indonesia's trade balance and overall current account, with these effects propagating and persisting over multiple quarters (Fauzi & Gunawan, 2023; Siregar et al., 2023). These findings underscore Indonesia’s high vulnerability to global commodity fluctuations and emphasize the urgent requirement for robust fiscal buffers and economic diversification strategies. Policy analysis reveals ongoing government efforts in energy subsidy reform and infrastructure investment but highlights continuing difficulties in reconciling energy security with overall macroeconomic stability (Robinson, 2023; UNCTAD, 2025). This comprehensive investigation contributes new empirical evidence and practical policy recommendations, establishing a valuable framework for managing LNG price shocks in Indonesia and analogous emerging markets.

The economy of a country can be seen from its internal conditions such as the real sector, namely production, consumption and investment. Then the monetary sector, such as inflation, the money supply and the balance of the exchange rate. In addition, the condition of the Indonesian economy can also be seen from external conditions which are reflected in the development of the balance of payments which illustrates the condition of the Indonesian economy in the real and monetary sectors. The balance of payments also measures the ability of the economy to support international transactions, especially transactions related to debt obligations and export-import transactions, and informs the government about the state of the economy, especially in this regard. On the results of economic relations with other countries. Thus, the balance of payments can assist in decision-making in the currency sector. Indonesia's balance of payments often fluctuates from time to time. A current account deficit does not result in a balance of payments deficit because the financial account increases capital and compensates for the current account deficit.

All records of money entering or leaving a country are kept in the balance of payments. This research was conducted with the aim of ascertaining the impact of exports, imports, inflation and interest rates on the balance of payments in Indonesia in the 2019-2022 period. The Central Statistics Agency, Bank Indonesia, and the Ministry of Trade of the Republic of Indonesia provide secondary data that is useful in a quantitative descriptive approach for the 2019-2022 period. Classical assumption testing and multiple linear regression analysis are the data analysis methods used. This research found that the variables exports (X1), imports (X2), and inflation (X3) had a negative effect on the balance of payments, while interest rates (X4) had a positive effect on Indonesia's balance of payments. Simultaneously exports, imports, inflation and interest rates influence the balance of payments in Indonesia.

In order to analyze the direct and indirect effects of the foreign direct investment on the Iraqis balance of payments and financial account for the period (2003-2015), the study population and sample selected was the Balance of Payments Division at the Central Bank of Iraq through the follow-up of the entry of the data incoming from the relevant parties like banks and Iraq Stock Exchange in order to calculate the foreign direct investment through sorting and isolating the transactions that are classified under this part of the balance of payments and then registering the value of the transaction in the balance of payments as credit or debit transaction. The research methodology used a sample represented by the Balance of Payments Compilation Guide issued by the International Monetary Fund. A study was conducted to compare the fifth edition of the guide that was issued in 1993 and the sixth edition that was released in 2009. The study concluded that the outflows of foreign direct investment from Iraq were relatively weak as they did not exceed USD1,562.4, representing only 7.4% of total capital inflows to Iraq, which is also small relatively and its share of total foreign direct investment inflows to Arab countries ranged from 1.2% in 2007 to 10.7% in 2014. Hence, the effect of the flows of foreign direct investment both inside and outside Iraq on the financial account in particular and the balance of payment in general was weak. Even though the primary effect of the inflows might be positive, the effect was negative on all items of the financial account and balance of payment in general during the whole period. In other words, the obligations resulting from the inflows are bigger than their counterpart from the outflows. The study recommended adopting and setting some certain mechanisms to ensure the transmission of the effects of the international economy through the foreign direct investment into the domestic economy and the real sectors. Consequently, the financial account of the balance of payments is initially affected. In turn indirect impacts take place on the current account and service account through affecting the macro variables like the gross fixed capital formation that is considered a productive capacity that could be utilized to increase production and attain positive growth.

Foreign Direct Investment (FDI) exerts a multifaceted influence on a country's Balance of Payments (BOP), encompassing both the capital and current accounts. In the capital account, FDI inflows represent crucial long-term investments by foreign entities into domestic assets, spanning from establishing new ventures to acquiring existing businesses or funding infrastructure projects. These inflows augment the country's capital base, providing essential funding for development endeavors, particularly vital for emerging economies. Additionally, FDI facilitates technology transfer and managerial expertise, fostering innovation and enhancing productivity. Consequently, this bolsters the competitiveness of domestic industries, potentially leading to increased exports and improved trade balances. However, FDI outflows, in the form of profits, dividends, and royalties repatriated by foreign investors, impact the income account of the current BOP, constituting outflows. Furthermore, FDI's influence extends to exchange rates, where significant inflows may lead to currency appreciation, affecting trade dynamics.

The purpose of this study is to analyze the causal relationship of external debt and balance of payment with foreign direct investment (FDI) in Bangladesh for the period of 1980 to 2017 through the application of Johansen Cointegration technique, Vector Error Correction Model (VECM), and Granger Causality approach. Results of cointegration and VECM indicate a significant long-run relationship between dependent (FDI) and independent variables (external debt and balance of payment). External debt is found to have a significant negative impact on FDI in the long-run, but it is found insignificant in the short-run. In contrast, the balance of payment has a significant positive effect on FDI both in the long-run and short-run. Results of the Granger causality test reveal that there exists bidirectional short-run causality between the balance of payment and FDI; that is, both the balance of payment and FDI affect each other. But no unidirectional or bidirectional short-run causality is found between external debt and FDI. Keywords: FDI, external debt, balance of payment, cointegration, VECM, causality

This study investigates the spatial influence and spillover effects of foreign direct investment (FDI) on environmental pollution (EP) by using panel spatial data in 1970-2016 for 12 selected Arab countries. It employs the STochastic Impacts by Regression on Population, Affluence, and Technology (STIRPAT) model. The spatial econometric approach is applied to examine the validity of the pollution haven hypothesis (PHH) and the pollution halo hypothesis (P-HH) (from now on, we will use the acronyms PHH and P-HH to denote the pollution haven hypothesis and pollution halo hypothesis, respectively). The Sustainable Development Goals (SDGs) are linked to the study results with a focus on cleaner production practices. The global Moran's I, local Moran's I, and Lagrange multiplier (LM) tests are used to ascertain the existence of spatial autocorrelation (SAR) and determine its trend. We also apply the spatial lag model (SLM), the spatial error model (SEM), and the spatial Durbin model (SDM) to achieve the study objectives. Data are analyzed by using the SDM on the basis of the results of the Wald and likelihood ratio tests. The results of the LM and global and local Moran's I tests confirm the existence of SAR. The SDM results reveal that a slight increase in CO2 is an influence of the FDI on EP. Findings support the existence of PHH in the Arab countries. The direct effect of the FDI is increased CO2 and environmental degradation, and the spatial spillover effects are statistically insignificant. This study suggests a set of policies for managing and directing FDI toward clean technology-based industries and reduced CO2 emissions. Such policies may contribute to the achievement of some SDGs and balancing economic development and environmental sustainability according to the cleaner production practice perspective in the Arab countries and other states with similar conditions.

Foreign direct investment and international movement of commodities are interrelated in the world economy. At the same time, the nature of this relationship and the causality issues are ambiguous and need to be studied from both theoretical and empirical sides. The aim of this paper is to estimate empirically the mutual influence of foreign direct investment and international trade in the modern economy. The econometric model is based on the gravity approach, the estimation is made using the Poisson pseudo maximum likelihood method on the data for 67 host and 109 home FDI countries for the period of 2001–2016. The hypotheses on the positive mutual influence of foreign direct investment and international trade are tested. A positive and significant influence of export and import flows on inward foreign direct investment is observed. The largest impact of export and import on foreign direct investment is observed when a two-year lag is considered. We could not reveal a significant influence of foreign direct investment on export and import flows either within one year, or for the lagged FDI values. The authors argue that pro-trade government policy, aimed at the integration of the country into global value chains is an important factor stimulating the inflow of foreign direct investment to the country. From the practical point of view, understanding the causal linkages between export, import and foreign direct investment helps state authorities better forecast the direct and indirect effects of various trade policy incentives.

This study aims to determine the monetary policy variable linkages with Indonesia's balance of payments. Using svar and IRF analysis found that the level of α = 0.05, variable monetary policy instruments such as open market operation (OPT), the minimum reserve requirement (GWM), and the discount rate (rDisk) has a significant relationship with the variable balance of payments (BOP) . In fact, all the macroeconomic variables also significantly affect the balance of payments variables, except the variable domestic interest rates. This means that there is a close link between monetary policy instruments with the balance of payments in Indonesia in the period of the study.

This study aims to analyze the effect of the short and long term gross domestic product, exchange rate, and inflation on Indonesia's balance of payments. The data used in this study are secondary data which is obtained indirectly with the period of 1995 to 2015. Data sources were obtained from Bank Indonesia and the Central Bureau of Statistics. The data collection method used in this study with the indirect method is documentation through recording or copying data from Bank Indonesia and the Central Bureau of Statistics. The analysis model used is Error Correction Mechanism (ECM). The results of this study indicate that the regression model of the Autoregressive Distributed Lag Model (ARDL) for the long term and Error Correction Model (ECM) regarding the effect of independent variables such as Interest Rates, Gross Domestic Product and Inflation Against the Dependent dependent variable in Indonesia, then it can some conclusions are presented, namely from several independent variables that are tried and included in the savings equation in Indonesia using the Autoregressive Distributed Lag Model (ARDL) for the long term and Error Correction Model (ECM) for the short term, namely the gross domestic product variable, the inflation rate, and exchange rate. In the long run there are 2 (two) significant variables, namely gross domestic product and the exchange rate. While inflation is not significant. For the short term, there is 1 (one) significant variable, namely the exchange rate. Thus, only exchange rate variables are significant in both the short and long term. With only 1 (one) significant independent variable both in the long term and short term, it can be concluded that the exchange rate in the long term and short term is the main determining factor that affects the Balance of Payments in Indonesia. In the long run, Independent variables such as Gross Domestic Product and the exchange rate on the dependent variable Balance of Payments in Indonesia have a significant effect on the dependent variable Balance of Payments. Whereas in the short run, the exchange rate variable has a significant effect, and for other independent variables such as the GDP variable and the inflation rate does not have a significant effect.

This study aims to empirically investigate the impact of a set of macroeconomic variables including balance of trade, FDI, exchange rate, and inflation on the balance of payments (BOP) of Afghanistan using quarterly data from the second quarter of 2004 to the fourth quarter of 2020 (2004Q2 to 2020Q4). The paper uses the Vector Error Correction Model (VECM), and Johansen co-integration test for analysis to explore the BOP of Afghanistan and provides comparable literature to other least-developed and low-income developing countries. The findings reveal that balance of trade (BOT), foreign direct investment (FDI), and exchange rate are significant determinants of Afghanistan’s BOP in the long run. More specifically, BOT and FDI positively impact the BOP, whereas the effect of the exchange rate on the BOP is found negative. Yet, inflation has an insignificant impact on the BOP. Though all variables have an insignificant impact on the BOP in the short run, the relevant policy measures ought to consider improvement in BOT, promoting FDI, and exchange rate stability to ensure synchronized improved BOP and economic growth.

The study examined the effect of balance of payment on foreign direct investment on the oil and gas sector in Nigeria. The study used ex-post facto research design and the population is made up of 5 oil and gas foreign investors in Nigeria. The sample size is the 5 oil and gas foreign investors. The study relied on reports from Central Bank of Nigeria for secondary data. The study employed various procedures in analysing the data such as correlation matrix, unit root test, co-integration and vector error correction model. The study found that causality ran from balance of payment to multinational corporations in Oil and Gas sector in Nigeria in terms of foreign direct investment which implied that balance trade openness caused increase in the inflow of FDI in Oil and Gas sector of Nigeria. This implied that balance of payment attracted more inflow of FDI in Oil and Gas sector in Nigeria. The study recommended that balance of payment policy in Oil and Gas should be formulated to encourage inflow of foreign direct investment in the sector in Nigeria. Government of Nigeria should seek for the assistant of Organization of the Petroleum Exporting Countries (OPEC) to direct investors in Oil and Gas to refine the oil and gas in Nigeria without exporting the raw material to their home country.

It is known that the economic stability and economic development of each economy depends on the free movement of capital. The international movement of capital has its balance of payment when capital export represents economic surplus in relation to consumption of the national economy and the import of capital represents an increase of consumption in regard to the output of a national economy. The paper is analyzed of the influence of foreign direct investment (FDI) on economic growth of the host country, among other things, is emphasized in the function of the achieved phase of its economic development. The aim of this paper refers to an attempt to indicate the significance and the role of FDI as well as the importance of attracting foreign direct investment in B&H and the determination of the effects of FDI on the economy of B&H. We will try to prove it, i.e. to determine the degree of impact of FDI on some macroeconomic indicators in B&H (GDP, import, export, unemployment) by using IBM SPSS v.22 statistical analysis program (model) and applying the methods, calculating coefficients of correlation and regression analysis. In other words, we will determine the analytical expression used to describe a statistical relationship of these macroeconomic categories.

SUMMARY The necessity of economic life and economic development of every economy is the free movement of capital. The international movement of capital has its balance of payment when capital export represents economic surplus in relation to consumption of the national economy and the import of capital represents an increase of consumption in regard to the output of a national economy. Analysis of the influence of foreign direct investment (FDI) on economic growth of the host country, among other things, is emphasized in the function of the achieved phase of its economic development. Taking all this into consideration, the aim of this paper refers to an attempt to indicate the significance and the role of FDI as well as the importance of attracting foreign direct investment in B&H and the determination of the effects of FDI on the economy of B&H. In this regard, we will try to determine the level of FDI’s impact on some macroeconomic indicators in B&H (GDP, import, export, unemployment) by using contemporary SPSS statistical analysis program (model) and applying the methods (calculating coefficients) of correlation and regression analysis. In other words, we will determine the analytical expression used to describe a statistical relationship of these macroeconomic categories.