THE IMPACT OF REAL EXCHANGE RATE VOLATILITY ON INDONESIA-US TRADE PERFORMANCE

This sudy examines the impact of real exchange value volatilities on bilateral trade performance between Indonesia and the United States utilizing the data period between Q1:1990 to Q3 2012. This study deploys two approach to measure real exchange values volatilities, Autoregressive Conditional Heteroskedasticity (ARCH-1) and Moving Average standard Deviation methods. To test the long terms relationship between variables, it uses Autogressive Distributed Lag (ARDL) bounds testing procedure. The result shows that real exchange values volatilities has negative influence on Indonesia's import from the United States but does not affect the Indonesia's export to the United States. Hence, the more volatile an exchange value leads to a decrease of Indonesia's import volume from the United States. If Indonesia attempts to balance its trade, it needs to keep intact monetary policies afloat and controllable.