An Empirical Reassessment of the Relationship between Interest Rate
and Net Export through ASEAN-5’s Foreign Exchange Reserves
RENEA SHINTA AMINDA1, ECIN KURAESIN1, SYAHRUM AGUNG1,
HANNISA RAHMANIAR HASNIN1, ANURAGA KUSUMAH1, ENDRI ENDRI2
1Faculty of Economic and Business, Universitas Ibn Khaldun Bogor,
Jl. KH Sholeh Iskandar KM 2 Bogor, 16162,
INDONESIA
2Faculty of Economics and Business, Universitas Mercu Buana,
Jl. Meruya Selatan No. 1, Kembangan, Jakarta Selatan 11650,
INDONESIA
Abstract: - The purpose of this study is to determine whether the real impact of interest rates and net exports
through ASEAN-5's foreign exchange reserves was significant between 2009 and 2019. This study employs five
ASEAN countries with the highest foreign exchange reserves: Indonesia, Malaysia, Singapore, Thailand, and
the Philippines. During 2009-2019, the sample was determined using a saturated sampling technique with five
countries. The data used is secondary data from the World Bank. In this study, hypothesis testing was
performed using Panel Data Analysis with the Views 10 program and a significance level of 5%. (0.05). The
findings indicate that interest rates and net exports have an impact on foreign exchange reserves. The findings
also show that the two independent variables have an impact on foreign exchange reserves at the same time.
Key-Words: - foreign exchange reserves, interest rates, net export, ASEAN-5
Received: April 30, 2022. Revised: October 16, 2022. Accepted: November 12, 2022. Available online: December 14, 2022.
1 Introduction
According to the International Monetary Fund, the
institution in charge of maintaining the
international monetary system, a country is
considered safe from economic shocks if it has
foreign exchange reserves equal to at least three
(three) months of imports. For the past 11 years,
ASEAN's foreign exchange reserves have
fluctuated but have tended to increase in the long
run. Singapore maintained its trend of having the
highest foreign exchange reserves for the past 11
years, with 285 billion USD in foreign exchange
reserves in 2019, followed by Thailand in second
place, with 224 billion USD in total foreign
exchange reserves in 2019, and Indonesia with 129
billion USD in 2019, Malaysia's total foreign
exchange reserve in 2019 was 103 billion USD,
while the Philippines' total foreign exchange
reserve was 89 billion USD. Indonesia's foreign
exchange reserves increased from 2009 to 2012
before declining in 2013 as the Chinese economy
weakened and the US dollar strengthened. In 2013,
Indonesia's foreign exchange reserves fell,
necessitating a dollar supply to support external
sector resilience and maintain macroeconomic and
financial system stability, [1].
Indonesia's foreign exchange reserves increased
again in 2014 as China's economic growth
stabilized and export activities increased, but
decreased again in 2015 due to spending on foreign
debt payments and the use of foreign exchange
reserves to maintain the rupiah exchange rate's
stability. Malaysia's foreign exchange reserves
increased from 2009 to 2012, then decreased in
2013 due to the strengthening of the US dollar;
from 2013 to 2016, Malaysia's foreign exchange
reserves continued to decrease before increasing
again in 2017. Singapore saw an increase between
2009 and 2013. Then, from 2014 to 2016, the level
of exports and the value of export products
decreased due to a slowdown in China's economic
growth, which caused a decrease in the level of
exports and a decrease in the value of export
products due to a decline in global demand.
Singapore's foreign exchange reserves increased
again in 2017. Thailand's foreign exchange reserves
fluctuate, but a significant decline occurred in 2013
due to the appreciation of the US dollar and the
weakening Chinese economy, followed by a
significant increase in 2017 that continued until
2019. The Philippines has large foreign exchange
reserves that have fluctuated. The Philippines'
foreign exchange reserves decreased in 2014 and
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2018 due to the strengthening of the US dollar and
the weakening of the Chinese economy. Foreign
exchange reserves are an indicator of a country's
resilience in the face of an economic crisis, so
having an adequate amount of them is critical.
According to the International Monetary Fund, a
country is considered economically fundamentally
safe if it has enough foreign exchange reserves to
cover three months' worth of imports.
According to World Bank data, the movement
of ASEAN-5 interest rates continued to fluctuate
from 2009 to 2019. Indonesia's interest rates
decreased in 2011, 2014, 2017, and 2019, but there
was an increase in foreign exchange reserves in
those years; on the other hand, interest rates
increased in 2015, but Indonesia's foreign exchange
reserves decreased due to spending on foreign debt
payments. This contrasts with the Mundell-
Flemming model, which asserts that interest rates
and foreign exchange reserves have a positive
relationship, [2]. The same thing happened in
Malaysia with the Mundel Flemming model, where
interest rates fell but foreign exchange reserves
increased from 2010 to 2012, but conditions
changed in 2016 and 2018 when interest rates rose
but Malaysia's foreign exchange division increased.
In Singapore, unlike in Indonesia and Malaysia,
there is only a small gap between Mundel
Flemming's theory and the reality that occurred in
2017, namely Singapore's interest rates decreased
while its foreign exchange reserves increased. The
Singapore government reduced interest rates in
2017 to protect against economic conditions in
2016, which saw a deflation of -0.53, so the 2017
Singapore interest rate was lowered to stimulate
economic growth and prevent a recession.
Meanwhile, according to Mundel Flemming's
theory, Thailand's interest rates and foreign
exchange reserves were very inversely proportional
from 2010 to 2019. If interest rates fell, Thailand's
foreign exchange reserves increased, and vice versa
if interest rates rose, Thailand's foreign exchange
reserves decreased. In contrast to the Philippines,
the phenomenon occurred only between 2010 and
2015, and then again in 2017. However, the
phenomenon that has been observed in ASEAN-5
countries for some time occurs because a country's
foreign exchange reserves are influenced by a
variety of factors other than interest rates.
Seeing the gap between economic theory
regarding the relationship between interest rates
and foreign exchange reserves with the reality that
is happening in ASEAN-5 countries. And look at
the fact that there is a phenomenon in net exports
with foreign exchange reserves in ASEAN-5
countries. Therefore, the authors limit the variables
in this study, namely the dependent variable on
foreign exchange reserves and the independent
variables are interest rates and net exports of
ASEAN-5 (Indonesia, Malaysia, Singapore,
Thailand, and the Philippines) from 2009 to 2019.
2 Literature Review
The Mundell-Fleming economic model was created
independently by Robert Mundell and Marcus
Fleming, [3]. This model extends the IS-LM model.
The Mundell-Fleming model describes an open
economy, whereas the classic IS-LM model
describes an autarky economy (or a closed
economy). As a result, the Mundell-Fleming model
takes this paradigm and applies it to an open
economy. Domestically produced consumption and
investment commodities, in particular, may be
requested and acquired by foreign agents in an open
economy. In this scenario, we're discussing
"exports" (X). Domestic consumers and businesses
can also demand and purchase foreign-made
consumption and investment goods. In this
scenario, we're discussing "Import" (M). "Net
Exports" (NX = X - M) are represented by the
difference between these values. The source of
income for such an alternative measure is [4]:
Y = C + I = G + NX
Gross Domestic Product is significantly influenced
by net exports, [5]. The Gross Domestic Product
(GDP) of a country is quickly becoming a key
indicator of its economy, [6]. Researchers
frequently use the expenditure approach, which
includes export and import data, when measuring
GDP. Both exports and imports are important
indicators of a country's economic progress. The
GDP can then be compared to determine how
quickly or slowly a country's economy is
expanding. However, essential exports and imports
are inextricably linked to the exchange rate. Lower
exchange rates can encourage a country to export
more and import less. The basic logic is that foreign
currency income causes the exchange rate to fall.
Transfers that include interests, on the other hand,
are the inverse, [7]. Net exports are the difference
between exports and imports. Both the export and
import values are in US dollars (USD). The CIF
(Cost, Insurance, and Freight) method is used to
value imports. Positive net exports increase foreign
currency reserves, while negative net exports
decrease foreign exchange reserves, indicating a
balance of payments deficit. As a result, to increase
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net exports, a country must increase sales to buyers
in other countries, [8].
Under flexible exchange rates, increased
government spending cannot stimulate demand
because the exchange rate appreciates and capital
inflows prevent interest rates from rising, resulting
in fewer net exports. Fiscal policy is more effective
because the monetary policy at fixed exchange rates
mitigates real exchange rate appreciation pressures.
Along with the assumption of twin deficits, it is
demonstrated that changes in government savings
should result in changes in the current account, [9].
As a result of the capital account crises of the
1990s, particularly in Asian countries around 1997,
capital account shock prevention has become
critical, necessitating adequate foreign exchange
reserves. The export booms that followed both
crises demonstrated the benefits of undervalued
currencies for export-led growth, [10].
Inflation causes interest rates and exchange
rates to become unstable; inflation also affects
interest rates and exchange rates. As part of its
economic management, the central bank adjusts
interest rates every three months. If the economy is
experiencing inflationary pressures, the central
bank will raise the base lending rate to limit the
amount of money available to individuals and
businesses, making borrowing more expensive.
Assuming that the host country's interest rate
remains constant, the increase in one country
creates an imbalance in money demand and supply,
causing the exchange rate to move to equilibrium.
Borrowing and investing across borders can be
profitable even when arbitrage benefits are not
available. If both the home and host countries raise
or lower interest rates at the same time, interest
rates do not affect the exchange rate, [11]. Export
competitiveness will deteriorate as interest rates
rise, while it will improve as interest rates fall. This
is because as borrowing rates rise, so does working
capital. Exporters were hesitant to take out a loan
because their working capital was shrinking as debt
repayment obligations were added. Because of a
lack of cash, the output will fall, resulting in a drop
in export volume. A decrease in export volume will
have an effect on the export value, which will
decrease, lowering export competitiveness, [12].
Foreign exchange reserves are assets held by a
country's central bank or monetary authority. The
most common reserve currencies are the US dollar,
euro, Japanese yen, and pound sterling. It is used by
the domestic country to fulfill international
responsibilities to the rest of the world. Foreign
exchange reserves include foreign banknotes,
foreign treasury bills, foreign bank deposits, long
and short-term foreign government securities, gold
reserves, IMF reserve positions, and IMF special
drawing rights. In a broad sense, a foreign
exchange reserve is an important component of a
country's economic strength that is used to balance
the balance of payments, stabilize the exchange
rate, and repay foreign debts. In a broad sense,
foreign exchange reserves refer to assets
denominated in foreign currency, such as cash,
foreign bank deposits, foreign securities, and so on,
[13]. The goal of keeping foreign exchange
reserves is to keep national currencies stable and
liquid in the event of an economic downturn, as
well as to ensure that a country meets its foreign
obligations. As a result, maintaining adequate
foreign exchange reserves while keeping a
country's development needs in mind is critical.
Foreign exchange reserve management is also
critical, [14]. Foreign currency reserve management
is a process that ensures that acceptable official
public sector foreign assets are easily accessible
and regulated by authorities to meet a country's or
union's established set of objectives, [15].
3 Method Analysis
The descriptive research method was used, which
focuses on the process of gathering empirical facts
and continuing with data identification. Double the
research begins with a description, then deep
exploration and interpretation in a long and detailed
sentence. The mathematical model is used to
perform systematic and technical analysis on all
data obtained through explanation in the form of
images, histograms, pie charts, and tables or graphs
that have been calculated and then expanded.
Data was collected from various sources with
observation periods ranging from 2009 to 2019 in
the form of secondary data at the World Bank in the
form of foreign exchange reserves, interest rates,
and net export data. I gathered data on the
dependent variable and the independent variable by
searching various websites such as the World Bank.
Panel regression analysis was used to analyze the
data, first analyzing the normality test data, then
exploring the analysis of each variable used, and
finally interpreting and testing the hypothesis test.
4 Results and Discussion
This study employs data on foreign exchange
reserves derived from total ownership of liquid
assets, monetary gold, and foreign exchange
holdings under the control of monetary authorities
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in the ASEAN-5 countries with the highest total
foreign exchange reserves in the Southeast Asia region between 2009 and 2019.
Table 1. ASEAN-s’5 Foreign Exchange Reserves (USD) 2009-2019
Year
Foreign Exchange Reserves
Indonesia
Singapore
Thailand
Philippines
Average
2009
66,118,917,969
192,046,029,173
138,419,119,048
44,205,983,463
107,498,820,774
2010
96,210,980,584
231,259,743,357
172,027,935,377
62,326,286,865
133,670,613,931
2011
110,136,597,663
243,798,272,472
174,891,021,492
75,123,089,218
147,504,133,015
2012
112,797,627,833
265,910,197,709
181,481,264,054
83,788,600,501
156,741,694,553
2013
99,386,826,239
277,797,711,590
167,230,223,499
83,182,370,908
152,490,166,898
2014
111,862,594,562
261,582,777,243
157,162,740,027
79,629,428,309
145,239,283,044
2015
105,928,847,089
251,875,782,495
156,459,956,383
80,640,411,492
138,037,467,945
2016
116,369,601,851
251,058,293,462
171,772,074,487
80,666,223,157
142,869,492,007
2017
130,215,330,383
285,000,274,601
202,538,295,198
81,413,504,335
160,322,800,840
2018
120,660,974,091
292,715,632,357
205,640,628,938
79,195,598,850
159,933,073,198
2019
129,186,464,021
285,477,830,550
224,355,506,655
89,515,298,356
166,432,964,150
Average
108,988,614,753
258,047,504,092
177,452,615,014
76,335,163,223
Data Source: World Bank
According to table 1, Singapore has the most
foreign exchange reserves of the other four
countries on average. This is due to Singapore's
high level of exports. The greatest increase in
Singapore's foreign exchange reserves occurred in
2010, with Singapore's foreign exchange reserves
increasing by 20.42% from 2009. This is because
Singapore's economy began to recover following
the 2009 recession. Singapore's balance of
payments in 2010 was driven by electronics
exports, particularly consumer demand in China
and IT investment firms in the United States.
Capital flows have also recovered, indicating that
foreign investor interest in Singapore has returned.
In comparison to the other four countries, the
Philippines has the lowest average score. This is
due to the Philippines having the lowest net exports
compared to four other countries, importing more
than exporting, and importing many raw materials
and semi-finished goods. It differs from Indonesia,
which has the ASEAN-5 countries' second-lowest
average foreign exchange reserves. Indonesia had
the highest increase in foreign exchange reserves in
2010, owing to a positive development in the
exchange rate and inflation rate 2010, which
maintained economic actors' expectations regarding
macroeconomics while also providing certainty for
economic actors in both the financial and real
sectors, resulting in increased productivity, exports,
and foreign exchange reserves of 45.51% in 2010.
Meanwhile, the highest increase in foreign
exchange reserves occurred in Malaysia in 2011,
owing to the strengthening of the Ringgit exchange
rate against the US dollar in 2011.
Meanwhile, according to the ASEAN-5 foreign
exchange reserve data for 2009-2019, Singapore
had the most foreign exchange reserves in 2018,
with 292,715,632,357.01 USD, driven by an
increase in Singapore's oil and gas exports of 17.1%
and a 4.2% increase in non-oil exports. The
Philippines had the lowest amount of foreign
exchange reserves in ASEAN-5 from 2009 to 2019,
with 44,205,983,462.39 USD.
An adequate amount of foreign exchange
reserves is very important for ASEAN-5 as a
country with an open economic system, namely
foreign exchange reserves are used by Indonesia,
Malaysia, Singapore, Thailand, and the Philippines
to maintain a stable balance of payments, foreign
exchange reserves can maintain exchange rates
local currency by intervening in the foreign
exchange market, foreign exchange reserves are
also used to pay off foreign debts and the
Philippines
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Table 2. ASEAN-5’s Interest Rates 2009 – 2019
Year
Interest Rates
Indonesia
Malaysia
Singapore
Thailand
Philippines
Average
2009
5.22
3.00
5.09
3.75
5.83
4.578
2010
6.24
2.50
5.17
3.13
4.45
4.298
2011
5.47
2.00
5.21
2.61
3.28
3.714
2012
5.85
1.81
5.24
2.59
2.52
3.602
2013
5.39
1.68
5.24
2.63
4.11
3.81
2014
3.85
1.54
5.21
3.20
4.30
3.62
2015
4.33
1.43
5.18
3.30
3.99
3.646
2016
4.72
1.50
5.16
3.17
4.05
3.72
2017
4.55
1.68
5.14
3.13
3.75
3.65
2018
4.41
1.78
5.17
2.86
3.00
3.444
2019
3.68
1.89
5.05
2.67
3.01
3.26
Average
4.882727
1.891818
5.169091
3.003636
3.844545
Data Source: Bank of Indonesia
According to table 2, Singapore's interest rates
continued to fluctuate but remained stable at 5%
from 2009 to 2019. Meanwhile, Malaysia's interest
rates were always the lowest among the ASEAN-5
countries from 2009 to 2019. This was due to
Malaysia implementing a policy to increase
domestic credit, which increased productivity. In
terms of the state of Indonesia, the highest interest
rate from 2009 to 2019 was set in 2010, by Bank
Indonesia to suppress inflation. Meanwhile,
Indonesia's lowest interest rate in 11 years, 3.68
percent, occurred in 2019. This is because Bank
Indonesia hopes that the business world will
implement an investment plan that will help the
economy grow better, beginning with strengthening
credit in the real sector, and this policy is also
implemented to increase purchasing power. In
contrast to Thailand, Thailand's highest interest rate
from 2009 to 2019 occurred in 2009, when the
interest rate was 3.75, due to Thailand
implementing a strict economic policy to suppress
inflation, while Thailand's lowest interest rate
occurred in 2010 when it was 2.59, Thailand did
this to boost domestic demand. In the Philippines,
as in Thailand, the highest interest rate occurred in
2009 and the lowest interest rate occurred in 2012.
This is due to a weakening of economic growth in
the United States, Europe, and China in 2012 as a
result of the US general election. Meanwhile, the
United States experienced a severe recession in
2009 as a result of the collapse of the housing
market, which was caused by low-interest rates and
inadequate mortgage regulation.
Indonesia's interest rate has an inversely
proportional or negative relationship, as seen in
2011, 2014, 2017, and 2019. This is due to Bank
Indonesia implementing an expansionary monetary
policy aimed at increasing productivity so that the
economy grows, but what happened in those four
years was that Indonesia's foreign exchange
reserves decreased, which is not consistent with the
Mundle Fleming theory, which states that interest
rates are directly proportional to foreign exchange
reserves.
Similar to Indonesia, Malaysia's interest rates
exhibit an inverse relationship, as evidenced by an
increase in foreign exchange reserves but a
decrease in interest rates between 2010 and 2012.
There was also a decrease in foreign exchange
reserves accompanied by an increase in interest
rates between 2016 and 2018. What happened in
Indonesia and Malaysia can be explained by the
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fact that when interest rates are high, people tend to
use their money to save, which means that
productive money is used to invest less, reducing
the country's ability to increase foreign exchange
reserves.
In contrast to Indonesia and Malaysia,
Singapore exhibits a directly proportional
relationship between foreign exchange reserves and
interest rates; whenever interest rates rise, foreign
exchange reserves rise as well, except in 2017. This
conforms to Mundell Flemming's theory, according
to which interest rates are directly proportional to
foreign exchange reserves. This can be explained as
follows: if a country's interest rates are high, it
encourages investors to invest their capital; if the
foreign capital is in the form of foreign currency, it
increases foreign exchange reserves.
Turning to Thailand, the relationship between
interest rates and foreign exchange reserves has
remained negative from 2009 to 2019. If interest
rates rise, Thailand's foreign exchange reserves fall,
and vice versa if interest rates fall, Thailand's
foreign exchange reserves rise. This is also true for
Indonesia and Malaysia. The same thing happened
in the Philippines, where interest rates and foreign
exchange reserves had an inverse relationship from
2009 to 2019, except in 2016, 2018, and 2019.
Except for Singapore, almost all of the ASEAN-5
countries show a relationship between interest rates
and inversely proportional reserves.
Table 3. ASEAN-5’s Net Export 2009 – 2019
Year
Net Export
Indonesia
Malaysia
Singapore
Thailand
Filipina
Average
2009
21,191,036,278
41,550,972,363
45,619,614,149
26,976,846,652
(8,962,220,915)
25,275,249,706
2010
21,212,148,896
40,434,591,220
63,099,137,642
19,684,244,162
(11,094,114,052)
26,667,201,574
2011
24,021,724,759
46,436,559,964
76,981,679,929
7,632,805,085
(13,866,049,882)
28,241,343,971
2012
(1,884,415,530)
33,875,653,964
71,489,958,547
880,051,502
(12,747,420,148)
18,322,765,667
2013
(6,237,109,752)
27,540,337,317
71,092,623,672
7,440,895,245
(10,647,205,111)
17,837,908,274
2014
(3,027,125,055)
31,341,554,661
73,803,243,756
23,908,777,048
(12,753,927,161)
22,654,504,650
2015
5,351,899,013
22,711,691,907
84,076,882,513
41,680,325,908
(17,854,385,030)
27,193,282,862
2016
8,234,324,960
19,990,335,309
83,419,784,550
56,051,035,538
(28,505,668,861)
27,837,962,299
2017
11,434,768,729
21,988,277,862
90,773,792,929
56,877,036,176
(31,521,653,140
29,910,444,511
2018
(6,713,373,308)
24,054,470,763
108,205,657,941
44,922,177,604
(39,364,380,326)
26,220,910,535
2019
(4,133,324,478)
27,150,908,125
105,830,750,341
51,047,439,796
(36,272,180,842)
28,724,718,589
Average
6,313,686,774
30,643,213,950
79,490,284,179
30,645,603,156
(20,326,291,406)
According to table 3, the highest average net
export of ASEAN-5 occurred in 2017, with a value
of 29,210,444,511.01. Meanwhile, the ASEAN-5's
average net export in 2013 was 17,837,908,274.05.
Due to the import of oil and gas, Indonesia ran a
trade balance deficit from 2012 to 2014 and again
from 2018 to 2019. Malaysia has not had a trade
balance deficit in 11 years because it has many
natural resource processing factories, such as palm
oil, and the products of natural resources are then
exported. Singapore has the highest average net
export among the ASEAN-5 countries, owing to the
Singaporean economy's emphasis on exports of
manufacturing and electronic machinery, port
cargo, financial services, tourism, and other
services. Thailand's economy was dependent on
exports from 2009 to 2019, according to
www.trade.gov, and the United States was
Thailand's main export market. Thailand's export
goods included cars, spare parts, accessories,
goods, electronics and computers, precious stones
and jewelry, rubber, and plastic products. In
contrast to Thailand, the Philippines experienced a
trade balance deficit for 11 years, owing to high
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imports of raw materials and intermediate goods,
according to the International Trade
Administration. From 2016 to 2019, the Philippines
experienced a current account deficit due to
aggressive capital imports for government
infrastructure programs.
Except in 2012 and 2015, the relationship
between net exports and foreign exchange reserves
in Indonesia is directly proportional; whenever net
exports increase, so do Indonesia's foreign
exchange reserves. Similarly to Indonesia, the
relationship between net exports and Malaysia's
foreign exchange reserves is positive; every
increase in net exports in Malaysia is always
accompanied by an increase in foreign exchange
reserves, except in 2010, 2012, 2014, and 2018.
Singapore, like Indonesia and Malaysia, has a
directly proportional relationship between net
exports and reserves, except for 2012-2015.
Thailand and the Philippines, on the other hand,
have an inversely proportional relationship between
net exports and foreign exchange reserves. Thailand
only had a positive relationship between net exports
and foreign exchange reserves in 2010, 2016, 2017,
and 2019. While the Philippines has had negative
net exports for 11 years, its foreign exchange
reserves have increased for several years. This can
be explained by the fact that Thailand's and the
Philippines' foreign exchange reserves are primarily
supplied by government foreign debt for
infrastructure development. Because three of the
five ASEAN-5 countries, namely Indonesia,
Malaysia, and Singapore, demonstrated a trend of a
directly proportional relationship from 2009 to
2019, it can be concluded that net exports and
foreign exchange reserves have a directly
proportional relationship.
Here, the author can conclude that interest rates
do indeed affect a country's foreign exchange
reserves, and interest rates themselves can attract
investors as a result of government policies; one of
the driving factors attracting investor interest is the
presence of low-interest rates in a country. The
findings of this study can also be seen in one of the
sample data sets, Malaysia from 2010 to 2012, as
follows:
Table 4. Malaysia’s Foreign Exchange Reserves and Interest Rate 2010 – 2012
Country
Year
FER
Interest Rate
Malaysia
2010
106,528,123,469.78
2
2011
133,571,684,231.73
1.81
2012
139,730,782,665.94
1.68
Source: World Bank
Based on the table above, it can be explained
that Malaysia's foreign exchange reserves increased
by 27,043,560,761.95 USD from 2010. An increase
also occurred in 2012, namely Malaysia's foreign
exchange reserves increased from
133,571,684,231.73 to 139,730,782,665.94,
whereas Malaysian interest rates decreased from
2.00 to 1.81 in 2011 and then decreased again in
2012. Several studies have found that interest rates
have a negative effect on foreign exchange reserves
[16], [17].
Table 4. Singapore’s Foreign Exchange Reserves and Net Export 2009 – 2011
Country
Year
FER
Net Export
Singapore
2009
192,046,029,172.21
45,619,614,148.23
2010
231,259,743,357.53
63,099,137,641.26
2011
243,798,272,471.04
76,981,679,928.61
Source: World Bank
According to the table above, there was a
20.42% increase in foreign exchange reserves in
2010 compared to the previous year, as well as a
38.31% increase in net exports. Foreign exchange
reserves increased in 2011 from
231,259,743,357.53 USD to 243,798,272,471.04
USD, and net exports increased from
63,099,137,641.26 USD to 76,981,679,928.61
USD, indicating that net exports and foreign
exchange reserves have a positive influence. This
study's findings are supported by research
conducted by [18], [19], [20], [21], [22].
WSEAS TRANSACTIONS on BUSINESS and ECONOMICS
DOI: 10.37394/23207.2023.20.25
Renea Shinta Aminda, Ecin Kuraesin,
Syahrum Agung, Hannisa Rahmaniar Hasnin,
Anuraga Kusumah, Endri Endri
E-ISSN: 2224-2899
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Volume 20, 2023
Table 5. Panel Regression Analysis
Variable
Coefficient
T-Statistik
Prob
C
1.94E+11
11.93660
0.0000
IR
-1.85E+10
-4.326250
0.0001
NE
0.787714
4.299849
0.0001
Source: Data processed with Eviews
Table 6. R Square Test and Hypothesis Test
R-squared
0.944869
Mean dependent var
1.46E+11
Adjusted R-squared
0.936658
S.D. dependent var
6.84E+10
S.E. of regression
1.72E+10
Akaike info criterion
50.11109
Sum squared resid
1.39E+22
Schwarz criterion
50.40306
Log-likelihood
-1370.055
Hannan-Quinn criteria.
50.22399
F-statistic
115.0736
Durbin-Watson stat
0.953701
Prob(F-statistic)
0.000000
Source: Data processed with EViews
1. Coefficient β
Beta The beta coefficient of the interest rate (IR)
variable is -1.85E+10, which means that the interest
rate variable can explain the dependent variable,
namely foreign exchange reserves (FER), by -
185%, or that every unit increase in the interest rate
variable can result in a -185% decrease in FER. The
net export (NE) variable's beta coefficient value is
0.787714, which means that the net export (NE)
variable can explain the dependent variable, namely
FER of 78%, or can be interpreted as every unit
increase of a net export variable can increase FER
of 78%.
2. Probability α
For the interest rate (IR) variable probability of
0.0001 means, it is proven that it is significant
because the probability value of the IR
variable < compared to alpha / α
For the net export (NE) variable probability of
0.0001 means, it is proven that it is significant
because the probability value of the NE
variable < compared to alpha / α
3. F-Statistics
F-Statistics value of 115.0736 with a
probability of 0.000000 which is smaller than
alpha, so it can be concluded that the independent
variables simultaneously have a significant effect
on the dependent variable (FER)
4. R-Square
Based on the R-Square regression of 0.944869,
this means that the independent variable/predictor
can explain the dependent variable (FER) of
94.49%
5. Adjusted R-Square
Based on the value of S.E Of Regression
which is 1.72E+10 and S.D Dependent Var of
6.84E+10. Then this proved to be a valid
regression as a predictor model because of the S.E
of Regression < S.D Dependent Var.
5 Conclusion
According to the findings of this study, the interest
rate has an impact on the ASEAN-5 foreign
exchange reserves. These outcomes occur because
interest rates, both high and low, influence the flow
of foreign capital into a country, and the flow of
foreign capital in the form of foreign currency can
increase a country's foreign exchange reserves.
Interest rates have a negative effect on foreign
exchange reserves, according to this study. Low-
interest rates in a country encourage people to
invest their money, increasing productivity; high
productivity in a country attracts foreign investors
to invest; foreign investment can take the form of
foreign currency, increasing the number of foreign
exchange reserves. Furthermore, low-interest rates
encourage domestic exporters to borrow capital,
which is then used for capital for export activities,
so that if exports increase more than imports, a
trade balance surplus is created, increasing the
number of foreign exchange reserves. These
findings are also based on the hypothesis and
previous research findings. According to the study's
findings, net exports have an impact on ASEAN-5
foreign exchange reserves. Because positive net
exports resulted in a trade balance surplus, the
surplus increased the number of foreign exchange
reserves. Negative net exports result in a trade
balance deficit, which depletes foreign exchange
WSEAS TRANSACTIONS on BUSINESS and ECONOMICS
DOI: 10.37394/23207.2023.20.25
Renea Shinta Aminda, Ecin Kuraesin,
Syahrum Agung, Hannisa Rahmaniar Hasnin,
Anuraga Kusumah, Endri Endri
E-ISSN: 2224-2899
270
Volume 20, 2023
reserves. As a result, net exports have a positive
effect on foreign exchange reserves. These findings
are also based on the hypothesis and previous
research findings.
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Syahrum Agung, Hannisa Rahmaniar Hasnin,
Anuraga Kusumah, Endri Endri
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Contribution of Individual Authors to the
Creation of a Scientific Article (Ghostwriting
Policy)
Conceptualization: Renea Shinta Aminda, Ecin
Kuraesin. Data curation: Syahrum Agung,
Hannisa Rahmaniar Hasnin. Formal analysis:
Endri Endri, Hannisa Rahmaniar Hasnin. Funding
acquisition: Ecin Kuraesin, Syahrum Agung.
Investigation: Syahrum Agung, Endri Endri.
Methodology: Endri Endri, Renea Shinta Aminda.
Project administration: Hannisa Rahmaniar
Hasnin, Anuraga Kusumah. Resources: Hannisa
Rahmaniar Hasnin, Ecin Kuraesin. Software: Endri
Endri, Renea Shinta Aminda. Supervision: Endri
Endri, Syahrum Agung. Validation: Renea Shinta
Aminda, Ecin Kuraesin. Visualization: Hannisa
Rahmaniar Hasnin, Syahrum Agung. Writing –
original draft: Renea Shinta Aminda, Anuraga
Kusumah. Writing – review & editing: Endri
Endri
WSEAS TRANSACTIONS on BUSINESS and ECONOMICS
DOI: 10.37394/23207.2023.20.25
Renea Shinta Aminda, Ecin Kuraesin,
Syahrum Agung, Hannisa Rahmaniar Hasnin,
Anuraga Kusumah, Endri Endri
E-ISSN: 2224-2899
272
Volume 20, 2023
Sources of Funding for Research Presented in a
Scientific Article or Scientific Article Itself
No funding was received for conducting this study.
Conflict of Interest
The authors have no conflicts of interest to declare
that are relevant to the content of this article.
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(Attribution 4.0 International, CC BY 4.0)
This article is published under the terms of the
Creative Commons Attribution License 4.0
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