The Analysis of the Influence of Trade Openness, Inflation, Exchange Rates, Foreign Direct Investment and Foreign Debt on Indonesia's Foreign Exchange Reserves 2012-2023

Abstract

Over the past decade, the trend of rupiah exchange rate depreciation and increasing global uncertainty such as the Covid-19 pandemic and the trade war between the United States and China are evidence that the availability of adequate foreign exchange reserves is very important. With the increasing demand for the provision of foreign exchange reserves, the value of foreign exchange reserves has become increasingly important to pay attention to. The purpose of this study is to analyze the effect of trade openness, inflation, exchange rates, foreign direct investment and foreign debt on Indonesia's foreign exchange reserves in 2012-2023. The data used in this study are secondary data in the form of time series obtained from Bank Indonesia and the Ministry of Trade of the Republic of Indonesia. The data analysis method used in this study is the Engle Granger Error Correction Model (EG-ECM) through the E-views 10 program. The results of this study indicate that in the short term the exchange rate has a significant negative effect on foreign exchange reserves and foreign debt has a significant positive effect on foreign exchange reserves. While in the long term the exchange rate has a significant negative effect on foreign exchange reserves and trade openness and foreign debt have a significant positive effect on foreign exchange reserves. Thus, policies to encourage increased export value, such as the raw material downstreaming program, need to be increased in scope, in addition to the government's role in maintaining the stability of the rupiah exchange rate and investor confidence also need to be further improved.