International Conference on Eurasian Economies
1-3 July 2014 – Skopje, MACEDONIA
Paper detail
Paper ID : 886
Status : Paper published
Language : English
Topic : Finance and Financial Crises
Presenter: Dr. Ferry Syarifuddin
Session : 5A Macroeconomics
The Exchange Rate Volatility in Indonesia and Policy Response
The Exchange Rate Volatility in Indonesia and Policy Response
- Dr. Ferry Syarifuddin (Bank Indonesia, Indonesia)
Abstract
High fluctuation of exchange rate in short horizon is obviously making economic activity more risky as uncertainty rises. Moreover, volatile exchange rates also make commodity prices, interest rates and a host of other variables more volatile as well. Although changes in long-run exchange rates tend to undergo relatively gradual shifts, in the shorter horizon, the exchange rate might be very volatile. Then there should be a systematic and measured policy to mitigate the foreign exchange fluctuations and to minimize the fluctuations as well as to drive it to its fundamental value. In this part, USD/IDR volatility is investigated using GARCH approach. The results reveal that, USD/IDR volatility in Indonesia is persistent. On the other hand, the following studies also present the outcomes of effectiveness of policy response by the Central Bank. Foreign-exchange sale interventions by the Central Bank lead conditional volatility of the USD/IDR to decrease slightly.
JEL codes: F31, E52, C58
Syarifuddin, Ferry (2014). "The Exchange Rate Volatility in Indonesia and Policy Response" in Proceedings of International Conference of Eurasian Economies 2014, pp.148-157, Skopje, MACEDONIA.
DOI: https://doi.org/10.36880/C05.00886
