UNIMAL Open Conference System, 2nd International Conference on Finance Economics and Business (ICOFEB)

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Analysis of key factors in Optimizing Indonesian Cocoa Exports (ARDL Approach)
Devi Andriyani, Mutiah septiani tanjung

Last modified: 2024-01-25

Abstract


Cocoa stands as a vital export commodity for Indonesia, contributing significantly to the nation's foreign exchange reserves in the agricultural sector. In 2020, Indonesia ranked sixth among the world's cocoa-producing nations and was the third-largest cocoa exporter globally. However, despite the immense market potential, Indonesia's cocoa exports have experienced fluctuations over the past 30 years, indicating the unstable nature of its export performance. Stable export performance is crucial as it reflects increased competitiveness, a key indicator of sectoral growth. Unstable export trends have the potential to decrease profit and foreign exchange earnings, impeding economic growth and long-term development. Increasing cocoa exports should ideally be supported by higher domestic cocoa production. However, elevated cocoa production does not always translate to increased export values, especially without support from other factors such as stable inflation rates and exchange rates. The balance between price and exchange rates significantly influences cocoa export values. Yet, Indonesia's inflation and exchange rates exhibit considerable fluctuations in both the short and long terms. Therefore, a more in-depth study related to these theories is essential. This research aims to analyze the roles of cocoa production and the impacts of inflation and exchange rate fluctuations on cocoa exports using the ARDL model, enabling optimal cocoa exports in the global market. The research utilizes the ARDL analysis method, enabling the examination of short-term and long-term relationships and influences among variables. The study results indicate that the data used provide the best linear unbiased estimates. The analyzed variables meet the criteria for selecting the best variables for the ARDL model. Changes in one variable in this study will influence other variables over the next five years. Indonesia's cocoa production performance has a negative and insignificant impact on the country's cocoa exports in both the short and long terms. Changes in inflation and exchange rates have a positive and significant impact on Indonesia's cocoa exports in both the short and long terms. Indonesia's cocoa production performance, inflation fluctuations, and exchange rate fluctuations simultaneously have a significant impact on the country's cocoa exports in both the short and long terms. The author recommends several strategies for optimizing cocoa exports, including the need for the maintenance and expansion of export markets, enhancing the quality, efficiency, diversification, and innovation of cocoa products, efforts to control inflation, strengthening the currency, establishing long-term contracts between cocoa exporters and importers, implementing currency risk management strategies such as hedging, conducting market research, changing marketing strategies, and fostering cocoa industry partnerships.


Keywords


Cocoa Export performance, cocoa production, inflation fluctuation, exchange rate fluctuations, ARDL