INFORMATION FLOW BETWEEN THE US DOLLAR-RUPIAH EXCHANGE RATES

Authors

Wee-Yeap Lau, University of Malaya - Malaysia
Tien-Ming Yip, University of Malaya - Malaysia

Document Type

Article

Abstract

This study investigates the information flow between non-deliverable forward (NDF), spot, and forward US dollar–rupiah exchange rates during the post-Quantitative Easing (QE) period. Our results show a unidirectional information flow from NDF to the spot and forward rates in the post-QE period. We also find that the Indonesian government securities (IGS) played a vital role during the QE period, while international reserves preceded the US dollar–rupiah spot, forward, and NDF exchange rates post-QE. Hence, international reserves became an important policy variable in managing the currency value. Our finding redefines the role of IGS as a policy tool. As a policy suggestion, the Bank Indonesia should maintain a sufficient amount of foreign reserves to mitigate foreign exchange risks of the rupiah.

Recommended Citation

Lau, Wee-Yeap and Yip, Tien-Ming (2020) "INFORMATION FLOW BETWEEN THE US DOLLAR-RUPIAH EXCHANGE RATES," Bulletin of Monetary Economics and Banking: Vol. 23: No. 3, Article 7.
DOI: https://doi.org/10.21098/bemp.v23i3.918
Available at: https://bulletin.bmeb-bi.org/bmeb/vol23/iss3/7

First Page

441

Last Page

464

Creative Commons License

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

Country

Malaysia

Affiliation

University of Malaya