REAL EXCHANGE RATE MISALIGNMENTS: THE CASE OF THE INDONESIAN RUPIAH

Authors

Rasbin Rasbin, Expertise Agency of The House of The Representatives of The Republic of Indonesia, IndonesiaFollow
Mohamad Ikhsan, University of Indonesia, IndonesiaFollow
Beta Y Githarie, University of Indonesia, IndonesiaFollow
Yoga Affandi, Bank Indonesia, IndonesiaFollow

Document Type

Article

Abstract

This paper analyses the equilibrium price of the Indonesian Rupiah using the Synthetic Control Method (SCM) and assesses its misalignments. We find evidence of Rupiah misalignment, as the currency was undervalued for most periods, except for 1993-1996. This finding is robust across model specifications, predictors, and weighting. Our finding implies that keeping the exchange rate at its equilibrium level is ideal, and that policymakers can take advantage of the undervalued currency to promote economic growth via exports.

Recommended Citation

Rasbin, Rasbin; Ikhsan, Mohamad; Githarie, Beta Y; and Affandi, Yoga (2021) "REAL EXCHANGE RATE MISALIGNMENTS: THE CASE OF THE INDONESIAN RUPIAH," Bulletin of Monetary Economics and Banking: Vol. 24: No. 3, Article 7.
DOI: https://doi.org/10.21098/bemp.v24i3.1268
Available at: https://bulletin.bmeb-bi.org/bmeb/vol24/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

Indonesia

Affiliation

Expertise Agency of The House of The Representatives of The Republic of Indonesia