Title : Exchange Rate Volatility and Covid-19 Effects on Indonesia's Food Products' Trade: Symmetric and Ashmmetric Approach
Authors:
- Kabiru Hannafi Ibrahim
- Rossanto Dwi Handoyo
- Feliks Dwi Kristianto
- Deni Kusumawardani
- Mohd Azlan Shah Zaidi
- Mohd Azlan Shah Zaidi
- Angga Erlando
- Tri Haryanto
- Finished Sarmidi
Department : Economics
Journal Name : Heliyon
Kinds of Journal : Q1
Keywords : Arch/Garch, Ardl, Exchange Rate Volatility, Food Products, Nonlinear Ardl, Trade Flows
Abstract:
This study aims to determine the symmetric and asymmetric effects of exchange rate volatility and other explanatory variables (real exchange rates, industrial production index, and Covid-19) on Sixteen (16) Food Products Trade Between Indonesia and the United States, Indonesia and China. The study used the arch/garch approach and estimate the volatility of the exchange rate. Linear and Nonlinear Autoregressive Distributed Lag (ARDL) were applied to estimate the short-and-round effect for the period 2009: M1-2020: M12. Finding from the ardl method indicate that, in the short-term exchange rate volatility has a significant positive/negative effect on many products exported and imported throughout the study period. Different results were found in the nonlinear ardl method where a significant effect occurred especially on the food product imports. The result further indicates that exchange rate volatility has a more negative effect symmetrically or asymmetrically. These results imply that most Indonesian traders to the United States and China Tend to Behave as Risk-Averse in the long run when responding to the Phenomenon of Exchange Rate Volatility. As a measure of robustness, a quantile regression further confirm that exchange rate volatility consistent affects food product trade. With this, therefor, stable exchange rate policies are need to be lessen the harmful effect of volatility on trade flows and balance the risk-paking behavior among importers and exporters.