The Role of Exchange Rates and Interest Rates in the Growth of Micro, Small, and Medium Enterprises (MSMEs) in West Java

Abstrak

This study investigates how exchange rate and interest rate movements affect MSME growth in West Java amid frequent rupiah volatility and monetary shifts. The objective is to identify transmission channels influencing costs, credit access, and demand, and to inform policy measures that bolster resilience. Using qualitative methods, semi-structured interviews were conducted with the Head of the Inflation Control Subdivision and three provincial economic staff, supported by document analysis. Thematic analysis reveals that rupiah depreciation raises input costs for import-reliant firms and complicates investment decisions, while exporters gain uneven benefits; higher interest rates constrain affordable credit, disproportionately affecting micro and small enterprises. Respondents recommend coordinated macroeconomic management, expanded subsidized microcredit, local supply-chain development, and capacity building. Further quantitative research is advised to measure effect magnitudes and policy effectiveness.