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Bulletin of Monetary Economics and Banking

Document Type

Article

Abstract

This paper analyzes the impact of exchange rate fluctuation on the output and price in two different regimes. The model employed distinguishes four different sources of impacts on the output and price, namely the anticipated and the un-anticipated exchange rate movement, the aggregate demand and the aggregate supply shock.The result confirms the impact of the exchange rate regime switch on how the exchange rate influences the output. The net impact of Rupiah depreciation will expand the output, indicating the dominance of the aggregate the demand shock through the competitive advantage than the aggregate supply shock through import price effect.The regime switch also alters the effectiveness of the monetary and the fiscal policy on the output. The magnitude of monetary and fiscal policy is much larger than the exchange rate impact on output, both managed and free floating regime.Keywords: exchange rate, anticipated vs. unanticipated depreciation, supply vs. demand channels.JEL Classification: F41, F43, F31

First Page

3

Last Page

22

Creative Commons License

Creative Commons Attribution-NonCommercial 4.0 International License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

Country

Indonesia

Affiliation

Bank Indonesia

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