Determinants of short and long-term exchange market pressure in Indonesia

Heru Wahyudi, Widia Anggi Palupi, I Wayan Suparta

Abstract


A decrease in a country's export prices and foreign exchange reserves is symptomatic of exchange rate market pressures, which would be described as an oversupply or disequilibrium in the money market. The method used in this study is the Vector Error Correction Model (VECM) to investigate Exchange Market Pressure (EMP) in Indonesia. This study utilizes secondary data obtained from Statistics Indonesia and Bank Indonesia (BI) website since 2008Q1-2021Q4. The findings of this study demonstrate a strong positive long-term relationship between domestic credit growth and the BI rate, a large negative long-term relationship between GDP growth and the BI rate, and no significant relationship between the current account balance and the exchange rate.


Keywords


Exchange Market Pressure; Vector Error Correction Model; Impulse Response Function; Variance Decomposition

Full Text:

PDF

References


Ali, W., Gohar, R., Chang, B. H., & Wong, W. K. (2022). Revisiting the impacts of globalization, renewable energy consumption, and economic growth on environmental quality in South Asia. Advances in Decision Sciences, 26(3), 75–98. https://doi.org/10.47654/v26y2022i3p75-98

Amiruddin, A. R. R. (2014). Tekanan Nilai Tukar dan Intervensi Bank Sentral di Tiga Negara ASEAN. Thesis. Institut Pertanian Bogor.

Ayuningtyas, M., & Purwono, R. (2020). Analisis Exchange Market Pressure di Indonesia Periode Setelah Krisis Moneter. Media Trend, 15(2), 333–344. https://doi.org/10.21107/mediatrend.v15i2.7437

Aziz, M. A., & Widodo, T. (2017). Exchange Market Pressure: Evidences from ASEAN Inflation Targeting Countries. Munich Personal RePEc Archive.

Bank Indonesia. (2018). Laporan Kebijakan Moneter. Retrieved from https://www.bi.go.id/id/publikasi/laporan/Documents/Laporan-Kebijakan-Moneter-Triwulan-III2018.pdf

Falianty, T. A., & Andhony, M. (2012). Exchange Market Pressure dan Intervensi Bank Indonesia. Jurnal Keuangan dan Perbankan, 14(1), 1–15. Retrieved from https://journal.perbanas.id/index.php/jkp/article/view/165

Feldkircher, M., Horvath, R., & Rusnak, M. (2014). Exchange market pressures during the financial crisis: A Bayesian model averaging evidence. Journal of International Money and Finance, 40, 21–41. https://doi.org/10.1016/j.jimonfin.2013.08.021

García, C., & Malet, N. (2007). Exchange Market Pressure, Monetary Policy, and Economic Growth: Argentina, 1993-2004. The Developing Economies, 45(3), 253–282. https://doi.org/10.1111/j.1746-1049.2007.00043.x

Girton, L., & Roper, D. E. (1976). A Monetary Model of Exchange Market Pressure Applied to the Post-War Canadian Experience. International Finance Discussion Paper, 1976(92), 1–32. https://doi.org/10.17016/ifdp.1976.92

Hegerty, S. W. (2018). Exchange market pressure, stock prices,and commodity prices east of the Euro. Journal of Economics and Management, 31, 74–94. https://doi.org/10.22367/jem.2018.31.04

Jing, Z. (2015). On the relation between currency and banking crises in developing countries, 1980–2010. The North American Journal of Economics and Finance, 34, 267–291. https://doi.org/10.1016/j.najef.2015.09.016

Johari, S. M., Wong, W. K., Anjasari, I. P., Ha, N. T. T., & Thuong, T. T. H. (2022). The Effect of Monetary Instrument of Islamic Banking Financing Channel Towards The Economic Growth in Indonesia. Jurnal Ekonomi & Studi Pembangunan, 23(1), 124–139. https://doi.org/10.18196/jesp.v23i1.13198

Khawaja, M. I., & Din, M.-U. (2007). Instrument of Managing Exchange Market Pressure: Money Supply or Interest Rate. The Pakistan Development Review, 46(4II), 381–394. https://doi.org/10.30541/v46i4iipp.381-394

Kyin, T. S., Chin, L., & Habibullah, M. S. (2013). Monetary Policy and Exchange Market Pressure in Malaysia. Pertanika Journal of Social Science and Humanities, 21(S), 29-46. Retrieved from http://www.pertanika.upm.edu.my/pjssh/browse/special-issue?article=JSSH-0933-2013

Lestano. (2010). A Structural VAR Model of Exchange Rate Market Pressure : The Case of Indonesia. Majalah Ekonomi, 62(1), 36–49.

Mardiana, L., & Prawoto, N. (2016). Analisis Penerimaan Pajak Reklame Kabupaten Magelang Dengan Pendekatan VECM Periode 2010 - 2014. Jurnal Ekonomi & Studi Pembangunan, 17(2), 193-202. https://doi.org/10.18196/jesp.17.2.3984

Ozcelebi, O. (2019). Assessment of asymmetric effects on exchange market pressure: Empirical evidence from emerging countries. The North American Journal of Economics and Finance, 48, 498–513. https://doi.org/10.1016/j.najef.2019.03.016

Panday, A. (2015). Impact of monetary policy on exchange market pressure: The case of Nepal. Journal of Asian Economics, 37, 59–71. https://doi.org/10.1016/j.asieco.2015.02.001

Pontines, V., & Siregar, R. (2008). Fundamental pitfalls of exchange market pressure-based approaches to identification of currency crises. International Review of Economics & Finance, 17(3), 345–365. https://doi.org/10.1016/j.iref.2006.10.001

Ratnasari, A., & Widodo, T. (2007). Exchange Market Pressure and Monetary Policies in ASEAN5. Munich Personal RePEc Archive.

Statistics Indonesia. (2020). Foreign Trade Statistics Import 2020 Volume I. Retrieved from https://www.bps.go.id/publication/2021/06/10/2f4516969cc6fa220892f170/statistik-perdagangan-luar-negeri-impor-2020-jilid-i.html

Sulaeman, C. S. R., & Lisna, V. (2016). Analisis EMP Indonesia dan Empat Negara ASEAN pada Masa Krisis. Jurnal Ekonomi dan Pembangunan Indonesia, 16(2), 105–122. https://doi.org/10.21002/jepi.v16i2.592

Sulistiana, I. (2017). Model Vector Auto Regression (VAR) and Vector Error Correction Model (VECM) Approach for Inflation Relations Analysis, Gross Regional Domestic Product (GDP), World Tin Price, BI Rate, and Rupiah Exchange Rate. Integrated Journal of Business and Economics, 1, 17-32. Retrieved from https://ojs.ijbe-research.com/index.php/IJBE/article/view/46

Widarjono, A. (2018). Ekonometrika Pengantar dan Aplikasinya Disertasi Panduan EViews (5th Ed.). UPP STIM YKPN.




DOI: https://doi.org/10.18196/jesp.v24i1.16131

Refbacks

  • There are currently no refbacks.


Copyright (c) 2023 Heru Wahyudi, Widia Anggi Palupi, I Wayan Suparta

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

 

Office:
Redaksi JESP UMY, Gedung E2 Lantai 2, Fakultas Ekonomi dan Bisnis, Universitas Muhammadiyah Yogyakarta
Jalan Brawijaya, Tamantirto, Kasihan, Bantul, Daerah Istimewa Yogyakarta 55183
Telp: (0274) 387656 ext.184
Fax: (0274) 387646
Email: jesp@umy.ac.id


Jurnal Ekonomi & Studi Pembangunan (JESP) is licensed under Creative Commons Attribution-ShareAlike 4.0 International.