Indonesia's Economy Amidst the Global Crisis: Geopolitical Impacts, the Fed, and Trump 2.0 Dynamics

Abstract

This study aims to analyze the influence of global external factors on Indonesia's economic growth, specifically during the period from January 2020 to December 2024. The variables examined include the Global Economic Policy Uncertainty Index (GEPUI), the Federal Reserve's benchmark interest rate (Fed Rate), the Rupiah exchange rate (NTR), global oil prices (Brent), geopolitical risk (GPR), and Donald Trump's protectionist policies (Trump 2.0), the latter represented by a dummy variable. The Autoregressive Distributed Lag (ARDL) method was employed to estimate both short-term and long-term relationships between these variables and Indonesia's Gross Domestic Product (GDP), as proxied by the Industrial Production Index (IPI). The results indicate that all variables exert a significant influence in both the short and long term. In the long term, the Fed Rate (p = 0.0010), GEPUI (p = 0.0018), Brent (p = 0.0059), and Trump (p = 0.0001) have a significant negative impact on economic growth. Conversely, the Rupiah exchange rate (p = 0.0380) and geopolitical risk (p = 0.0234) have a positive influence. These findings confirm that global pressures have a tangible and complex impact on the Indonesian economy, necessitating adaptive and responsive policies to navigate global dynamics.