MONETARY POLICY EFFECT ON INDONESIA’S EXPORT AS AFFECTED BY COVID-19: AN ANALYSIS OF VECTOR ERROR CORRECTION MODELS DURING 2010-2020

The objective of the research was to analyze the impact of monetary policy on Indonesian
exports (X) through intermediate instruments such as Bank Interest Rates, Reserve Requirement
(GWM), and Exchange Rates (EXC). Using the Vector Error Correction Model (VECM)
approach, this research demonstrates that monetary policy model for influencing the export in
the long-run and the short-run. This technique is known by dynamic model. The results showed
that in the shorth-run the significant effect on export was only given by money in the broad
terms. Meanwhile in the long-run, the significant effect on export was given by all of the
variables where the country currently faces monumental fiscal challenges posed by the economic
and revenue impacts of the Covid-19 pandemic. However, their ability to use fiscal policy to
overcome these challenges is still very limited due to structural and capacity issues. In this study,
it is limited to analyzing monetary policy only. The findings underscored that the although
basically estimation model used with Vector Error Correction Model (VECM) estimation has
been done a lot, during the Covid-19 pandemic it was still limited to see how monetary policy
behavior before and after Covid-19 and its impact against Indonesian exports.