The Impact of Exports and Imports on Economic Growth in Indonesia: The Mediating Role of Exchange Rates

Putri Haryani, S. M. Ferdous Azam

Abstract

Indonesia’s growth prospects are revising due to the increasing intensified social unrest and geopolitical tension between the United States and China that affected Indonesia’s international trade. On the other hand, several obstacles usually prevent economic growth, such as surging population growth, inadequate infrastructure, limited resources or their inefficient utilization, and excessive government intervention. Since Indonesia’s economic growth fluctuated every year, this study aimed to investigate the country’s economic growth through exports, imports, and exchange rates from 1980 to 2019. In addressing these objectives, multiple regression analysis is used as a research method with the ordinary least square regression approach to examine the effects of the exports, imports, and exchange rates on Indonesia’s economic growth. The findings show that exports and exchange rates indirectly influence economic growth, while imports play an essential role in positively affecting the growth. Surprisingly, after being mediated by the exchange rate, the relationship between export and imports shows significant positive results. Furthermore, the outcomes of this study can be helpful for the Government as input and consideration in determining policies, especially those related to increasing economic growth through export and import activities.

 

Keywords: economic growth, Indonesia, exchange rates, export, import.


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