Passed Through or Pushed Back? Exchange Rate Effects on Manufacturing Trade Prices in Indonesia and the ASEAN Plus Three

This study analyzes the Exchange Rate Pass-Through (ERPT) on export and import prices in Indonesia’s manufacturing trade with ASEAN Plus-three countries (China, Japan, and South Korea) using monthly data from 2016 to 2022. Employing the Nonlinear (NARDL) models, we examine the degree and asymmetry of ERPT across five key manufacturing sectors for each partner. The NARDL model confirms asymmetric price responses to currency appreciation and depreciation in several sectors. The findings reveal significant sectoral and country-specific variations. Some export sectors experience complete pass-through in the short term but shift to negative complete passthrough in the long run. Meanwhile, imports from China and South Korea generally show a negative complete pass-through, while Japanese imports exhibit no significant ERPT. The results highlight the importance of exchange rate policies tailored to sector characteristics and partner countries, along with risk mitigation strategies, to strengthen Indonesia’s export and import competitiveness.