AGRICULTURAL FOREIGN DIRECT INVESTMENT AND FARMER EXCHANGE RATE: AN ARDL APPROACH IN INDONESIA

Abstract

This study aims to analyze the effect of Foreign Direct Investment (FDI) in the agricultural sector, inflation, and land area on the Farmer Exchange Rate (FER) in Indonesia during the period 1995–2024. This study uses secondary time series data obtained from Badan Pusat Statistik, Bank Indonesia, and other related institutions. The analytical method used is the Autoregressive Distributed Lag (ARDL) model to examine the short-run and long-run relationships among variables. The results show that agricultural sector FDI has a positive and significant effect on FER in the short run, but no significant effect in the long run. Inflation has a positive and significant effect on FER in the long run. Meanwhile, land area only has a significant effect in the short-run lag period and is not significant in the long run. These findings indicate that improving farmers’ welfare is influenced not only by investment, but also by economic stability and effective agricultural sector management.

Keywords: agricultural sector FDI, inflation, land area, Farmer Exchange Rate, ARDL