Economic Factors Affecting Malaysia - Indonesia Border Living: A Systematic Literature Review

Abstract

This study employs a systematic literature review (SLR) to examine economic factors influencing the cost of living in Malaysia - Indonesia border communities, with a focus on currency exchange rates, employment opportunities, informal trade dynamics, dual currency usage, and policy effectiveness. A total of 50 relevant studies published between 2000 and 2023 were systematically analyzed using the Wolfswinkel Five Phase approach. The review reveals that informal cross-border trade serves as a critical livelihood strategy, generating employment and enhancing household resilience despite institutional and infrastructural constraints. Dual currency systems particularly the coexistence of the Malaysian Ringgit and Indonesian Rupiah facilitate market inclusivity but introduce price instability and currency substitution risks. Exchange rate fluctuations affect cost of living indirectly through trade volume and liquidity rather than direct price transmission. Policy frameworks suffer from weak enforcement, fragmented coordination, and limited financial literacy outreach, undermining efforts to formalize trade or stabilize local economies. The findings highlight the need for integrated, community sensitive policies that balance regulation with economic empowerment. This study contributes to consumer and family economics by illuminating how border households navigate complex economic environments to meet daily consumption needs a key dimension of household welfare in frontier regions.