Macroeconomic Factors and Balance of Payment: Evidence from Indonesia

AGUS EKO SUJIANTO, 197108072005011003 (2020) Macroeconomic Factors and Balance of Payment: Evidence from Indonesia. Industrial Engineering & Management Systems, 19 (1). pp. 266-272. ISSN 1598-7248

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Abstract

The study aims at examining the relationship of macroeconomic variables including exchange rates, national income, interest rates, and inflation on the balance of payments in Indonesia. This research applied a Vector Error Correction Model (VECM) to determine the relationship between variables in the short-term and the long-term period. This study used data from Bank Indonesia and Statistics Indonesia from 2010 to 2017. The findings show that in the long-term, all variables, including exchange rates, national income, interest rates, and inflation, have a significant effect on Indonesia’s balance of payment. In more detail, interest rates and national income have a significant positive effect on the balance of payments, in contrast, the exchange rates and inflation have a significant negative effect on Indonesia’s balance of payments. In the short-term, the exchange rate, national income, interest rates and inflation have no impact on Indonesia’s balance of payments.

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