Pratomo, Wahyu Ario (2005): Exchange Rate of Indonesia: Does Rupiah Overshoot?
Download (80kB) | Preview
This research attempts to analyze whether Rupiah overshoots when the crisis hit Indonesia in mid of 1998. It also try to find out the fundamental macroeconomic factors that influence exchange rate when economic crisis hit Indonesia. It uses ordinary least square method and also cointegration in order to see long-term relationship. Furthermore, in order to examine the stability of exchange rate when the exchange rate system changed from managed floating to free floating, this paper apply Chow Test. The result shows that when the economic crisis hit Indonesia, Rupiah overshoots and there has been a structural change of exchange rate after 1998.
|Item Type:||MPRA Paper|
|Original Title:||Exchange Rate of Indonesia: Does Rupiah Overshoot?|
|Keywords:||Overshoot;exchange rate;economic crisis;Indonesia|
|Subjects:||E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E51 - Money Supply; Credit; Money Multipliers
F - International Economics > F3 - International Finance > F31 - Foreign Exchange
E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates
|Date Deposited:||28. Feb 2008 16:53|
|Last Modified:||08. Jan 2014 21:30|
Backus, D., (1984). Empirical models of the exchange rate: separating the wheat from the chaff. Canadian Journal of Economics 17, 824–846. Bahmani-Oskooee, M., (1998). Do exchange rates follow a random walk process in middle eastern countries? Economics Letters 58, 339–344. Bahmani-Oskooee, M. and Orhan Kara, (2000). Exchange Rate Overshooting in Turkey. Economics Letters 68 (2000) 89–93 Dornbusch, R., (1976). Expectations and exchange rate dynamics. Journal of Political Economy 84, 1161–1176. Driskill, R.A., (1981). Exchange rate dynamics: an empirical investigation. Journal of Political Economy 89, 357–371. Flood, R.P., Taylor, M.P., (1996). Exchange rate economics: what is wrong with the conventional macro approach. In: Frankel, J.A., Galli, G., Giovannini, A. (Eds.), Micro Structure of Foreign Exchange Markets, The University of Chicago Press. Frankel, J.A., (1979). On the mark: a theory of floating exchange rate based on real interest differentials. American Economic Review 69, 610–627. Hairault, Jean-Olivier, Lise Patureau and Thepthida Sopraseuth, (2004). Overshooting and the exchange rate disconnect puzzle: a reappraisal. Journal of International Money and Finance 23, 615–643 Kim, S., Roubini, N., (2000). Exchange Rate Anomalies in the Industrial Countries: A Solution with a Structural VAR Approach. Journal of Monetary Economics 45, 561–586. Macdonald, R., Taylor, M.P., (1993). The monetary approach to the exchange rate. IMF Stafff Papers 40, 89–107. Obstfeld, M., Rogoff, K., (2000). The Six Major Puzzles in International Macroeconomics: Is There a Common Cause? In: Bernanke, B., Rogoff, K. (Eds.), N.B.E.R Macroeconomic Annual 2000. MIT Press, Cambridge, MA, pp. 339–390. Papel, D.H., (1988). Expectations and exchange rate dynamics after a decade of floating. Journal of International Economics 25, 303–317.