REAL EXCHANGE RATE MISALIGNMENTS: THE CASE OF THE INDONESIAN RUPIAH

Rasbin (), Mohamad Ikhsan (), Beta Y. Gitaharie () and Yoga Affandi
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Rasbin: The House of Representative of Republic of Indonesia
Mohamad Ikhsan: University of Indonesia
Beta Y. Gitaharie: University of Indonesia

Bulletin of Monetary Economics and Banking, 2021, vol. 24, issue 3, 441-464

Abstract: This paper analyses the equilibrium price of the Indonesian Rupiah using the Synthetic Control Method (SCM) and assesses its misalignments. We find evidence of Rupiah misalignment, as the currency was undervalued for most periods, except for 1993-1996. This finding is robust across model specifications, predictors, and weighting. Our finding implies that keeping the exchange rate at its equilibrium level is ideal, and that policymakers can take advantage of the undervalued currency to promote economic growth via exports.

Keywords: Misalignments; Equilibrium real exchange rate; Real exchange rate; Synthetic control method (search for similar items in EconPapers)
JEL-codes: C29 F10 F31 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:idn:journl:v:24:y:2021:i:3f:p:441-464

DOI: 10.21098/bemp.v24i3.1268

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