Electronic Theses and Dissertation

ABSTRACT
Governments in developing nations have traditionally relied on migrant
remittances as a source of foreign revenue. Remittances from abroad workers are
their primary source of capital, and other countries rely almost entirely on
remittances for exchange rates. This study aims to determine the effect of
remittances, gross domestic product and international exchange reserve on
exchange rates.
This study uses yearly data from 1983-2020 obtained from the World Bank
and estimates Error Correction Model (ECM). The results show that remittances
have a negative and significant effect on the exchange rate both in the short and
long term. Gross domestic product (GDP) and international exchange reserves also
show negative and significant results effects on the exchange rate. This implies that
if remittances, international reserves, and GDP increase, the rupiah exchange rate
appreciates against the dollar. Therefore, it is important for the government to
facilitate and manage Indonesian migrant workers because of their significant share
of remittances to The Indonesian economy.

Keywords: Remittances, Exchange Rates, GDP, International Exchange
Reserves, Error Correction Model (ECM)

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