<![CDATA[Objective: This study investigates the causal impact of the Local Currency Transaction (LCT) policy on export performance, focusing on jewelry commodities (HS 71) from East Java, Indonesia. It addresses the limited sectoral- and regional-level evidence on LCT, as previous studies have predominantly examined the policy at the aggregate or national level. Design/Methods/Approach: This study employs a Difference-in-Differences (DiD) approach using panel data from five export destination countries over the 2015–2020 period. Malaysia and Thailand are classified as the treatment group because they adopted LCT, while Singapore, India, and Hong Kong serve as the control group. Findings: The results show that LCT adoption significantly increases export value by approximately USD 41.2 million in treated countries relative to the control group. The findings are robust to the parallel trends assumption and remain consistent after controlling for macroeconomic factors such as GDP per capita and exchange rates. The results also indicate that LCT reduces transaction costs by eliminating double currency conversion and weakens exchange rate pass-through, thereby supporting export price stability and international competitiveness. Originality/Value: This study extends the LCT literature by providing empirical evidence at the sectoral and regional levels. It also contributes to the New Institutional Economics perspective by demonstrating the role of LCT as an institutional innovation that reduces transaction costs in international trade. Practical/Policy Implication: The findings suggest that LCT can function not only as a monetary policy instrument but also as a trade facilitation mechanism. Its implementation may support export competitiveness by reducing currency conversion costs and improving export price stability.]]>
