Dynamics of Indonesia’s Foreign Exchange Reserves: The Role of the External Sector from Short- and Long-Term Perspectives
Keywords:
foreign exchange reserves, oil and gas exports, external debt, exchange rate, FDI, ECM
Abstract
This study aims to examine the effects of oil and gas exports, external debt, the Indonesian rupiah–US dollar exchange rate, and net inflows of Foreign Direct Investment (FDI) on Indonesia’s foreign exchange reserves in both the short and long run. This study employs a quantitative approach using annual secondary data for Indonesia covering the period from 1986 to 2025. The Error Correction Model (ECM) is applied to identify the dynamic relationships among the variables across both time horizons. The long-run estimation results indicate that oil and gas exports, external debt, and the exchange rate have positive and statistically significant effects on foreign exchange reserves, whereas FDI net inflows have a negative but statistically insignificant effect. In the short run, changes in oil and gas exports and external debt have positive and significant effects on changes in foreign exchange reserves. Changes in the exchange rate also have a positive and significant effect at the 10 percent significance level, while changes in FDI net inflows do not have a statistically significant effect. These findings indicate that movements in Indonesia’s foreign exchange reserves are primarily associated with foreign currency inflows generated through exports and external financing, while the direct contribution of FDI to foreign exchange reserves remains limited. The findings underscore the importance of strengthening export performance, managing external debt productively, maintaining exchange rate stability, and improving the quality of FDI toward productive and export-oriented activities.
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Bake, P. A., Hodijah, S., & Nurjanah, R. (2024). Analysis of the effects of exports, exchange rates, and foreign debt on Indonesia's foreign exchange reserves. E-Journal Perdagangan Industri dan Moneter, 12(1), 36–50. https://online-journal.unja.ac.id/pim/article/view/35840
Basuki, A. T., & Mulyani, P. (2024). Analysis of the factors affecting Indonesia's foreign exchange reserves. EKOMA: Jurnal Ekonomi, Manajemen, Akuntansi, 3(3). https://doi.org/10.56799/ekoma.v3i3.3335
Bintoro, C. S. (2022). Analysis of the factors affecting foreign direct investment in Indonesia. Jurnal Economina, 1(3), 547–562.
https://doi.org/10.55681/economina.v1i3.131
Budi, M. A. S., Setiawati, R. D., Putri, R. A., & Rifai, M. (2024). The effects of inflation, exports, and the BI 7-Day Reverse Repo Rate on Indonesia's foreign exchange reserves, 2020–2022. Al-Kharaj: Jurnal Ekonomi Keuangan & Bisnis Syariah, 6(5), 3649–3665. https://doi.org/10.47467/alkharaj.v6i5.1165
Candrawinata, P. K., & Widiana, I. N. W. (2025). Determinants analysis of Indonesia's foreign exchange reserves in 1990–2023. International Journal of Economics, Management and Accounting, 2(3).
https://doi.org/10.61132/ijema.v2i3.722
Davis, B. K., & Akbar, M. A.-F. R. (2022). Determinants of foreign direct investment in six ASEAN countries using a panel data approach. Jurnal Ilmiah Ekonomi Bisnis, 27(3), 403–417. https://doi.org/10.35760/eb.2022.v27i3.5555
Fiddien, A. A., Nasir, M. S., & Zakiyyah, N. A. (2023). Analysis of the effects of exports, foreign debt, foreign direct investment, and international tourist arrivals on Indonesia's foreign exchange reserves. Jurnal HUMMANSI, 6(2), 24–39. https://doi.org/10.33488/1.jh.2023.2.37
Fitriyanto, N., Ardiansyah, M., Wibowo, M. G., & Satibi, I. (2021). The dynamics of the relationship between foreign direct investment (FDI), macroeconomic variables, and Islamic stock index returns in four ASEAN countries. An-Nisbah: Jurnal Ekonomi Syariah, 8(2), 322–365.
https://doi.org/10.21274/an.v8i2.4471
Fortuna, A. M., Muljaningsih, S., & Asmara, K. (2021). Analysis of the effects of exports, the rupiah exchange rate, and foreign debt on Indonesia's foreign exchange reserves. Equilibrium: Jurnal Ilmiah Ekonomi Manajemen dan Akuntansi, 10(2). https://doi.org/10.35906/je001.v10i2.779
Fortuna, A. M., Muljaningsih, S., & Asmara, K. (2021). Analysis of the effects of exports, the rupiah exchange rate, and foreign debt on Indonesia's foreign exchange reserves. Equilibrium: Jurnal Ilmiah Ekonomi Manajemen dan Akuntansi, 10(2). https://doi.org/10.35906/je001.v10i2.779
Harahap, G. M., & Usman, U. (2026). The effects of inflation, foreign debt, foreign direct investment (FDI), and renewable energy on Indonesia's foreign exchange reserves. Jurnal Aplikasi Ilmu Ekonomi.
https://ojs.unimal.ac.id/jaie/article/view/20484
Holifah, H., & Laut, L. T. (2022). A vector error correction model (VECM) approach to FDI and imports as determinants of national foreign exchange reserves. Buletin Ekonomika Pembangunan, 3(3).
https://doi.org/10.21107/bep.v3i3.16786
Jaya, I. G. N. S., & Widanta, A. A. B. P. (2023). The effects of education, foreign direct investment, and unemployment on poverty levels across Indonesian provinces. E-Jurnal Ekonomi dan Bisnis Universitas Udayana, 12(11), 2217. https://doi.org/10.24843/eeb.2023.v12.i11.p10
Kumar, S., Prabheesh, K. P., & Gunadi, I. (2026). Unravelling the factors behind Indonesia's international exchange reserves. Journal of Asian Economics, 102, 102105. https://doi.org/10.1016/j.asieco.2025.102105
Loyola, Mg. O. F. S., Noreña, F. E. A., Aldana-Trejo, F., & Gonzales, L. F. R. (2024). The macroeconomic role of imports in Peru, 1960–2022. Ciencia Latina Revista Científica Multidisciplinar, 8(1), 1800–1831.
https://doi.org/10.37811/cl_rcm.v8i1.9570
Maesyaroh, W. U., & Kundhani, E. Y. (2024). Analysis of the factors affecting foreign exchange reserves. Jurnal Ilmu Ekonomi (JIE), 8(1), 92–109.
https://doi.org/10.22219/jie.v8i01.29769
Mahgaraini, P. C., & Arsita, N. C. (2024). Analysis of the effects of macroeconomic variables on Indonesia's foreign exchange reserves from the perspective of Islamic economics, Quarters I–III of 2023. Jurnal Publikasi Ekonomi dan Akuntansi, 4(3), 81–93. https://doi.org/10.51903/jupea.v4i1.2668
Monasterios, E. Á. F. (2022). The impact of hydrocarbon nationalization on natural gas exports and GDP in Bolivia, 1996–2012. Economía & Negocios, 4(1), 58–79. https://doi.org/10.33326/27086062.2022.1.1350
Nasution, K. F. D., & Nasution, A. R. (2026). The effect of palm oil exports, machinery imports, and foreign debt on foreign exchange reserves in Indonesia, 2005–2024. Economic Education Analysis Journal, 15(2). https://doi.org/10.15294/eeaj.v15i2.49565
Nasution, T. S., Harahap, S. A. P., Hasibuan, E. K. S., & Matondang, K. (2023). The role of the 2019–2021 international balance of payments in Indonesia's economic balance. Indonesian Journal of Advanced Research, 2(7), 803–812. https://doi.org/10.55927/ijar.v2i7.4328
Pebriyanti, I., & Khoirudin, R. (2024). Analysis of the determinants of foreign exchange reserves in ASEAN-5 countries. BALANCE: Economic, Business, Management and Accounting Journal, 21(1).
https://doi.org/10.30651/blc.v21i1.22113
Prasetyanto, P. K., Hutajulu, D. M., & Apriyadi, R. (2022). Dynamics of oil and gas and non-oil and gas exports and imports in relation to Indonesia's foreign exchange reserves: A vector autoregressive approach. Forum Ekonomi: Jurnal Ekonomi, Manajemen dan Akuntansi, 24(3).
https://garuda.kemdiktisaintek.go.id/documents/detail/2935444
Pratama, S. A., & Utomo, Y. P. (2022). Analysis of the factors affecting foreign exchange reserves during 2000–2019. Ekonomis: Journal of Economics and Business, 6(2), 562. https://doi.org/10.33087/ekonomis.v6i2.616
Pratama, S. A., & Utomo, Y. P. (2022). Analysis of the factors affecting foreign exchange reserves during 2000–2019. Ekonomis: Journal of Economics and Business, 6(2), 562. https://doi.org/10.33087/ekonomis.v6i2.616
Rahmawati, S., & Suriani, S. (2022). The impact of macroeconomic indicators on Indonesia's foreign exchange reserve position. Jurnal Ekonomi Pembangunan: Kajian Masalah Ekonomi dan Pembangunan, 23(1), 19–30. https://doi.org/10.23917/jep.v23i1.17673
Ramadhan, A. A., Herlina, D., Ginanjar, R. A. F., & Suhendra, I. (2026). Analysis of the effects of exports, imports, and exchange rates on foreign exchange reserves in Indonesia. Asian Journal of Economics, Business and Accounting, 26(6), 184–194. https://doi.org/10.9734/ajeba/2026/v26i62299
Rasyidin, M., Saleh, M., & Rizkina, A. (2023). The effects of interest rates, foreign loans, and exports on foreign exchange reserves in Indonesia. TIN: Terapan Informatika Nusantara, 3(10), 405–413.
https://doi.org/10.47065/tin.v3i10.4130
Ruslan, N. R., Leasiwal, T. C., Louhenapessy, D. J., Hanoeboen, B. R. A., Sapteno, F., & Laitupa, A. A. (2024). Analyzing factors affecting Indonesia's foreign exchange reserves for the 2012–2021 period. International Journal of Economics, Business and Accounting Research, 8(4).
https://doi.org/10.29040/ijebar.v8i4.15323
Rusydiana, A. S., Rani, L. N., & Hasib, F. F. (2025). Which indicators are most important for financial system stability? A macroprudential perspective. Jurnal Ekonomi dan Pembangunan, 27(1), 25–42.
https://doi.org/10.14203/jep.27.1.2019.25-42
Safitri, S., Mutia, A., & Anggraeni, L. (2023). The effects of exports, imports, exchange rates, and inflation on Indonesia's foreign exchange reserves during 2016–2021. Jurnal Ilmiah Manajemen Ekonomi dan Akuntansi, 3(3), 315–320. https://doi.org/10.55606/jurimea.v3i3.281
Santika, W. D., & Dwiatmoko, R. (2022). Analysis of the determinants of Indonesia's foreign exchange reserves during 1991–2020. Ekonomikawan: Jurnal Ilmu Ekonomi dan Studi Pembangunan, 22(1).
https://doi.org/10.30596/ekonomikawan.v22i1.10044
Setiawati, R. I. S., & Harpy, M. (2023). Effects of oil and gas commodity exports and imports on foreign exchange reserves in Indonesia. JEA17: Jurnal Ekonomi Akuntansi, 8(1), 12–27. https://doi.org/10.30996/jea17.v8i1.8636
Siregar, R. W., Affianty, D., Hamka, H., & Usni, U. (2023). The International Monetary Fund's response in assisting Indonesia in addressing the economic recession caused by the 2020–2021 pandemic. Jurnal Lanskap Politik, 1(3), 155. https://doi.org/10.31942/jlp.2023.1.3.9493
Sukoco, F. M. (2023). The effects of economic openness, exchange rates, foreign investment, and inflation on Indonesia's foreign exchange reserves. Media Ekonomi, 31(1), 1–14. https://doi.org/10.25105/me.v31i1.17283
Waruwu, A. F., Rengganis, M., & Matondang, K. A. (2023). The influence of inflation, foreign investment, and remittance receipts on the rupiah exchange rate during 2014–2018. Indonesian Journal of Advanced Research, 2(7), 847–856. https://doi.org/10.55927/ijar.v2i7.4540
Yusuf, H., & Nugroho, S. (2022). Should Indonesia leave the free trade agreement? Jurnal Perspektif Bea dan Cukai, 6(2), 258–272.
https://doi.org/10.31092/jpbc.v6i2.1759
Zulfikar, & Syafira, S. (2024). The effects of gross domestic product, imports, and exchange rates on foreign exchange reserves in Indonesia. Journal of Malikussaleh Public Economics, 7(2).
https://doi.org/10.29103/jompe.v7i2.20102
Published
2026-10-28
How to Cite
Ramah, N. M., & Mustika, N. (2026). Dynamics of Indonesia’s Foreign Exchange Reserves: The Role of the External Sector from Short- and Long-Term Perspectives. International Journal of Economics, Business and Innovation Research, 5(06), 1989-2009. https://doi.org/10.63922/ijebir.v5i06.7063
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