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Steadying the Ship: Can Export Proceeds Repatriation Policy Stabilize Indonesian Exchange Rates Amid Short-Term Capital Flow Fluctuations?

Author

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  • Sondang Marsinta Uli Panggabean

    (Faculty of Economics and Business, Universitas Indonesia, Depok 16424, Indonesia
    Bank Indonesia, Jakarta 10350, Indonesia)

  • Mahjus Ekananda

    (Faculty of Economics and Business, Universitas Indonesia, Depok 16424, Indonesia)

  • Beta Yulianita Gitaharie

    (Faculty of Economics and Business, Universitas Indonesia, Depok 16424, Indonesia)

  • Leslie Djuranovik

    (Bank Indonesia, Jakarta 10350, Indonesia)

Abstract

This paper investigates the impact of repatriated export proceeds on exchange rate volatility in Indonesia. By applying a time-varying parameter vector autoregression (TVP-VAR) model with stochastic volatility, we assess whether the impact of repatriated export proceeds can dampen the effect of short-term capital flows. Our findings indicate that the influence of export proceeds on exchange rate volatility varies over time, with no evidence supporting its ability to dampen the impact of short-term capital flows in the short and intermediate terms. Furthermore, we identify a reversal pattern in the impacts of both repatriated export proceeds and short-term foreign capital flows after 3–5 days, suggesting a potential need to evaluate policies aimed at dampening short-term capital flow impacts on exchange rate volatility. Our results are robust across a range of sensitivity and robustness checks, confirming the reliability of our findings.

Suggested Citation

  • Sondang Marsinta Uli Panggabean & Mahjus Ekananda & Beta Yulianita Gitaharie & Leslie Djuranovik, 2025. "Steadying the Ship: Can Export Proceeds Repatriation Policy Stabilize Indonesian Exchange Rates Amid Short-Term Capital Flow Fluctuations?," Economies, MDPI, vol. 13(6), pages 1-26, June.
    • Handle: RePEc:gam:jecomi:v:13:y:2025:i:6:p:180-:d:1682459
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