Foreign Exchange Expectations in Indonesia: Regime Switching Chartists & Fundamentalists Approach

Ferry Syarifuddin (), Noer Azam Achsani, Dedi Budiman Hakim and Toni Bakhtiar

Bulletin of Monetary Economics and Banking, 2014, vol. 17, issue 2, 1-24

Abstract: This paper investigates the effect of central bank intervention using a heterogeneous expectations exchange rate model. We apply Markov switching approach on daily USD/IDR exchange rate, intervention data of Bank Indonesia, from 2006 to 2012. The results support both chartists and fundamentalist regimes, and confirm the two regimes to be persistent. Moreover, the intervention of Bank Indonesia on foreign exchange is capable to drive the USD/IDR to its fundamentalist rule. However, on Bank Indonesia efforts to exert a stabilizing effect of foreign exchange interventions, the result is inconclusive.

Keywords: Exchange rates; foreign-exchange intervention; switching regression (search for similar items in EconPapers)
JEL-codes: C24 E52 F31 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:idn:journl:v:17:y:2014:i:2:p:1-24

DOI: 10.21098/bemp.v17i2.49

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