Exchange Rate Volatility and Export Volume: The Case of Indonesia and its Main Trading Partners
This paper examines the impact of exchange rate volatility on Indonesia's export to-United States, Japan and China using both aggregate and disaggregate data. We first estimated each pair country with export demand equations based on data from 1996 to 2014. A set of export demand equations is estimated by using Seemingly Unrelated Regression to characterized the correlation of the disturbances across equations. In general, the estimation result shows that exchange rate volatility has negative impact on export. Estimations based on disaggregate data indicate that the impact of the exchange rate volatility on exports remains negative however it varies among industries in the countries under investigation.