Abstract
<jats:p>Natural rubber is a strategic non-oil and gas commodity for Indonesia, acting as a crucial pillar for the national trade balance and the socioeconomic livelihoods of millions of smallholder farmers. However, its export value has exhibited extreme volatility over the past three decades, creating macroeconomic vulnerabilities and threatening rural incomes. This study aims to analyse the short-term and long-term determinants of Indonesia’s natural rubber export value from 1994 to 2024. Using annual time-series data, this research evaluates four key variables: world rubber price (RSS3), Real Effective Exchange Rate (REER), domestic rubber production, and Foreign Direct Investment (FDI). The Error Correction Model (ECM) was employed to disentangle transient short-run dynamics from long-run equilibrium paths. The empirical results reveal that world rubber price (RSS3) and domestic production exert significant positive effects on export value in both the short and long term. In contrast, REER and FDI do not show statistically significant impacts. The insignificance of the exchange rate reflects price rigidities from dollar-denominated international contracts, while the limited effect of FDI indicates a structural misallocation of foreign capital toward non-agricultural sectors. These findings challenge standard macroeconomic assumptions, such as the Marshall-Lerner condition, within the context of developing nations' raw commodity trade, proving that export performance is primarily driven by global price shocks and domestic physical supply rather than currency competitiveness. Practically, this study highlights the urgency for the government and industry stakeholders to accelerate downstream industrialization, formulate targeted FDI incentives for rubber processing, and execute continuous replanting programs to shield the sector from global market instability.</jats:p>