Analysis of the Effect of Real Exchange Rate, Exports, and Imports on Indonesia’s Trade Balance in 1990-2020

Abstract

This research aims to analyze the Marshall-Lerner condition in Indonesia's trade with its main currency trading partners. This study deployed the OLS approach to analyze the 1990-2020 data series; the estimation steps included classical assumption, model time, and regression coefficient tests. The results unveiled that the exchange rate, exports, and imports significantly affected Indonesia's trade balance. It is the first study at Universitas Muhammadiyah Surakarta to examine the effect of the export-import real exchange rate on Indonesia's trade balance from 1990 to 2020.