Export determinant analysis: Indonesia s export to Singapore and Japan case study

Abstract

Purpose- This study analyses the influence in Rupiah’s exchange rate and the economic growth of trading partner country of Indonesia’s export which are Singapore and Japan as the two biggest trading countries in Indonesia’s export products in Asia region. Methodology- Economy models used as analysis tools in this research are co-integration method and dynamic linear Error Correction Mechanism Model. Findings- This study discovered that in long term, exchange rate has a negative impact to Indonesia’s export, both for Singapore and Japan, while in short term the exchange rate does not have any correlation with export. Subsequently, economic growth of the trading partner country in long term has positive impact to export, while in short term it has no impact. Conclusion- Findings of this empirical studies showed that in the long term, the effect of the exchange rate to Indonesia’s export to Japan is greater compared to Singapore. Subsequently, the effect of Singapore’s economic growth to Indonesia’s export is greater compared to the effect of Japan’s economic growth. The exchange rate has negative impact to Indonesia’s export, both from Singapore and Japan. The result of this study has a probability to happen in Indonesia because Indonesia’s export is still dominated by commodities with prices that tend to decrease, thus the effect of weakening rupiah is very small compared to export increase.