The Effect of GDP and Exchange Rate on Import of Photovoltaic Cells in Indonesia

Document Type : Research Paper

Authors

1 Department of Economics, Faculty of Economics and Business, Airlangga University, Surabaya, Indonesia

2 PT. PLN Persero, Jakarta, Indonesia

3 School of Business and Management, Institut Teknologi Bandung, Bandung, Indonesia

10.22059/ier.2023.327948.1007232

Abstract

The use of renewable energy has increasingly become a great concern for many countries due to environmental issues. One of the widely used sources of renewable energy nowadays is solar energy. The conversion of solar energy into electrical occurs through three main types of technology, namely photovoltaic (PV), solar thermal, and concentrating solar power (CSP). PV is the fastest-growing and widely used technology. In   Indonesia, the utilization of PV technology continues to rise especially in the use of rooftop PV. Indonesia currently imports PV components such as solar cells from abroad. Most of the PV cells are imported from high-income countries. This study analyzes the effect of differences in Gross Domestic Product (GDP) per capita between Indonesia and trading partner countries. It also analyzes the effect of the real exchange rate on imports of photovoltaic cells from 13 countries in 2004-2019. Meanwhile, analysis of the impulse response and panel variance decomposition obtained from the Panel Vector Error Correction Model (PVECM) was used to ascertain the import response to the independent shock variable. Therefore, it was concluded that the differences in GDP per capita of Indonesia together with trading partner countries significantly affect the importation of photovoltaic components in the long run. In contrast, Rupiah's real exchange rate against partner countries' currency has a significant effect on imports of photovoltaic cells in the short and long term.

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