THE INFLUENCE OF OIL PRICES ON INDONESIA’S EXCHANGE RATE

Seema Wati Narayan (), Telisa Falianty () and Lutzardo Tobing
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Seema Wati Narayan: Royal Melbourne Institute of Technology University
Telisa Falianty: Universitas Indonesia
Lutzardo Tobing: Bank Indonesia

Bulletin of Monetary Economics and Banking, 2019, vol. 21, issue 3, 303-322

Abstract: This study tests for a long-run relation between oil prices and the rupiah–US dollarexchange rate. We discover, first, that the long-run cointegration relation between oilprices and the real exchange rate (RER) is sensitive to different exchange rate regimesin Indonesia. Second, we find a long-run cointegrating relation between oil prices andthe RER over the float exchange rate regime. However, in the managed float period,there is no evidence of a long-run relation between oil prices and the RER. In the longrun, higher oil prices lead to an appreciation of the rupiah against the US dollar in thefloat period (post-August 1997 period). We demonstrate that these results are robust todifferent data frequencies.

Keywords: Cointegration; Exchange Rate Regime; Oil Price; Real Exchange Rate (search for similar items in EconPapers)
JEL-codes: E31 F31 Q43 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:idn:journl:v:21:y:2019:i:3b:p:303-322

DOI: 10.21098/bemp.v21i3.1007

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