Bulletin of Monetary Economics and Banking

Document Type



The shifting of the exchange rate regime toward the free floating system in Indonesia, have changed the nature of the Indonesian Rupiah fluctuation, both in its magnitude and direction. Public opinion tends to believe that the high corporate demand on foreign exchange to fulfill their foreign debt repayment is one of the major depreciating factors of the Rupiah against the US dollar.This paper analyzes the response of public opinion by analyzing the effect of corporate foreign debt repayments and their general behavior on the foreign exchange demand and supply. This paper also analyzes the impact of the non-oil and gas imports, the international oil price, the interest rate differential, and the country risk.Based on the survey of selected highly leverage corporates in Indonesia, the result shows a unique dependency of the corporate»s foreign exchange demand and supply on the corporate»s earning characteristics and its business sector orientation. The fact that corporations are virtually in the position of excess demand for foreign exchange have prompted persistent pressure on the Rupiah. Furthermore, using the Johansen Cointegration Test and the Error Correction Model verifies that the corporate foreign debt service merely affects the Rupiah exchange rate in the long-run. In the short-run, the movement of Rupiah is highly affected by other factors such us the global oil price, interest rate differentials, and country risks.Keyword: Debt Service, exchange rate, cointegration, Error Correction Model, Indonesia.JEL Classification: JEL Classification: F31, F34, H63

First Page


Last Page