Foreign Reserves or Interest Rates? Exchange Rate Determinants and Risk Management in Indonesia Instant Noodle Industry

Zahara Kayla Nur Puji Anisa; Diana Puspitasari

doi:10.69725/jebi.v2i3.312

Authors

Zahara Kayla Nur Puji Anisa Department of Management, Faculty of Economics and Business, Universitas Dian Nuswantoro, Kota Semarang, Indonesia, 50131
Diana Puspitasari Department of Management, Faculty of Economics and Business, Universitas Dian Nuswantoro, Kota Semarang, Indonesia, 50131

DOI:

https://doi.org/10.69725/jebi.v2i3.312

Keywords:

Exchange rates, Foreign exchange reserves, Interest rate, Risk management, Macroeconomic stability

Abstract

Purpose: The focus of this research is on analyzing the relative role of external buffers and policy tools in determining exchange rate dynamics and assessing their implications for risk management, particularly in import-dependent manufacturing sectors. The study attempts to determine the main macroeconomic factor that influences currency dynamics by contrasting the impacts of foreign exchange reserves and policy interest rates.

Method: The research is quantitative in nature, based on the analysis of secondary macro-economic data and an integrated structural modeling framework. Several macroeconomic factors are jointly considered to account for their direct influence on exchange rates, whilst focusing more on the strength of the effect, variance explanation, or predictive capability than on stand-alone significance.

Findings: The findings suggest that in terms of the effect on the exchange rate, both foreign exchange reserves and the policy interest rate are consistent with their directional movements, implying stabilizing roles in the macroeconomic system. But on the whole, our results indicate that exchange rate behavior depends on a combination of monetary conditions, external buffers, and global commodity-driven pressures as opposed to one major policy instrument.

Novelty: This paper is a novel contribution to the literature by taking a comparative approach on both external and monetary policy mechanisms in an integrated framework, with a clear focus of exchange rate dynamics hinged upon the risk factors and import-dependent sectors.

Implications: The results have implications for policy in the configuration of symmetric exchange rate stabilization strategies, and guiding tools that are useful for real firms to navigate currency exposure in a context of volatility in the global economy.

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Author Biographies

Zahara Kayla Nur Puji Anisa, Department of Management, Faculty of Economics and Business, Universitas Dian Nuswantoro, Kota Semarang, Indonesia, 50131

Zahara Kayla Nur Puji Anisa is an undergraduate student in the Department of Management, Faculty of Economics and Business, Universitas Dian Nuswantoro, Indonesia. Her research interests focus on macroeconomic analysis, exchange rate dynamics, monetary policy, and financial risk management, particularly in relation to import-dependent industries. She has actively engaged in empirical research using quantitative methods and structural modeling approaches. This article forms part of her academic research activities and reflects her interest in applying macroeconomic theory to practical risk management and policy-relevant issues.
Diana Puspitasari, Department of Management, Faculty of Economics and Business, Universitas Dian Nuswantoro, Kota Semarang, Indonesia, 50131

Diana Puspitasari, S.E., M.M. is a lecturer in the Department of Management, Faculty of Economics and Business, Universitas Dian Nuswantoro, Indonesia. Her academic expertise includes financial management, macroeconomic policy analysis, and applied econometrics. She has published in nationally and internationally indexed journals and actively supervises research in monetary economics and financial risk management. Her research emphasizes the integration of macroeconomic theory with empirical analysis to support evidence-based policy and managerial decision-making.

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