HOW DO INDONESIAN EXPORTS AFFECT ECONOMIC GROWTH THROUGH THE EXCHANGE RATE?

Abstract

The purpose of this study is to analyze the direct and indirect effects of exports on economic growth through the exchange rate. The method used in this research is path analysis using time series data obtained from the World Bank. The results showed that exports with the calculation of the value of direct influence are smaller than the value of indirect influence, which means that exports have a direct but insignificant effect on economic growth through the exchange rate as an intermediate variable. The calculation of inflation shows that the value of direct influence is greater than the value of indirect influence, meaning that inflation has no direct and insignificant effect on economic growth through the exchange rate as an intermediate variable. So the conclusion of this study shows that what directly affects economic growth through the exchange rate is exports through the exchange rate as an intermediate variable. Exports allow the country to earn more foreign exchange, which is then used to drive the economy to increase economic growth. Inflation has no direct effect on economic growth through the exchange rate as an intermediate variable. The government should further improve Indonesia's export performance in each period of the year to accelerate domestic economic growth.