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, 197-220

Abstract: In this research, the effect of central bank intervention within a heterogeneous expectations exchange rate model, is investigated. The empirical evidence is conducted by applying a Markov switching approach to daily USD/IDR exchange rate, intervention data of Bank Indonesia from 2006 to 2012. The results are supporting both chartists and fundamentalist regimes. It is shown that the two regimes are persistent. Meanwhile, Bank Indonesia’s foreign-exchange intervention has been able to drive the USD/IDR to its fundamentalist rule. However, Bank Indonesia efforts to exert a stabilizing e?ect of foreign exchange interventions, the result are 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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Persistent link: https://EconPapers.repec.org/RePEc:idn:journl:v:17:y:2014:i:2g:p:197-220

DOI: 10.21098/bemp.v17i2.49

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