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.
Narayan, Seema Wati; Falianty, Telisa; and Tobing, Lutzardo
"THE INFLUENCE OF OIL PRICES ON INDONESIA’S EXCHANGE RATE,"
Bulletin of Monetary Economics and Banking: Vol. 21:
3, Article 5.
Available at: https://bulletin.bmeb-bi.org/bmeb/vol21/iss3/5