THE INFLUENCE OF OIL PRICES ON INDONESIA’S EXCHANGE RATE

Authors

Seema Wati Narayan, Royal Melbourne Institute of Technology University, AustraliaFollow
Telisa Falianty, University of Indonesia, IndonesiaFollow
Lutzardo Tobing, Bank Indonesia, IndonesiaFollow

Document Type

Article

Abstract

This study tests for a long-run relation between oil prices and the rupiah–US dollarexchange rate. We discover, first, that the long-run cointegration relation between oilprices and the real exchange rate (RER) is sensitive to different exchange rate regimesin Indonesia. Second, we find a long-run cointegrating relation between oil prices andthe RER over the float exchange rate regime. However, in the managed float period,there is no evidence of a long-run relation between oil prices and the RER. In the longrun, higher oil prices lead to an appreciation of the rupiah against the US dollar in thefloat period (post-August 1997 period). We demonstrate that these results are robust todifferent data frequencies.

Recommended Citation

Narayan, Seema Wati; Falianty, Telisa; and Tobing, Lutzardo (2019) "THE INFLUENCE OF OIL PRICES ON INDONESIA’S EXCHANGE RATE," Bulletin of Monetary Economics and Banking: Vol. 21: No. 3, Article 5.
DOI: https://doi.org/10.21098/bemp.v21i3.1007
Available at: https://bulletin.bmeb-bi.org/bmeb/vol21/iss3/5

First Page

303

Last Page

322

Creative Commons License

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

Country

Australia

Affiliation

Royal Melbourne Institute of Technology University