EARLY WARNING SYSTEM AND CURRENCY VOLATILITY MANAGEMENT IN EMERGING MARKET

Authors

Natasia Engeline S, Bank Indonesia, IndonesiaFollow
Salomo Posmauli Matondang, Bank Indonesia, IndonesiaFollow

Document Type

Article

Abstract

This paper adopts theoretical models from Candelon, Dumitrescu, and Hurlin and empirical model from Commerzbank to devise a set of indicators that can serve as an early warning system (EWS) on exchange rate. In light of the appreciation of emerging countries’ currencies during the Fed quantitative easing period, it is important to understand on how The Fed normalization would put pressure on managing volatility for central banks, especially for countries with large trade and fiscal deficit such as Indonesia. All in all, using both EWS models, central banks could discern potential exchange rate depreciation for intervention purpose.

Recommended Citation

S, Natasia Engeline and Matondang, Salomo Posmauli (2016) "EARLY WARNING SYSTEM AND CURRENCY VOLATILITY MANAGEMENT IN EMERGING MARKET," Bulletin of Monetary Economics and Banking: Vol. 19: No. 2, Article 4.
DOI: https://doi.org/10.21098/bemp.v19i2.627
Available at: https://bulletin.bmeb-bi.org/bmeb/vol19/iss2/4

First Page

129

Last Page

152

Creative Commons License

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

Country

Indonesia

Affiliation

Bank Indonesia