Exchange Rate Pass Through Viewed from Wholesale Price in Indonesia

Sri Isnowati, Fx Sugiyanto, Akhmad Syakir Kurnia and Endang Tjahjaningsih

Montenegrin Journal of Economics, 2020, vol. 16, issue 3, 137-147

Abstract: This paper explores the effect of changes in exchange rates on domestic prices, known as Exchange Rate pass Through. The data used in this study are data on the economy in Indonesia in the period 1997.3 to 2017.4. The analytical tool used is multiple regression with the Error Correction model approach. Based on the results of the analysis conducted shows that the effect of the exchange rate on the wholesale price index in the long run is greater than the short run. This shows that the effect of the ex-change rate on domestic prices is indirect.The foreign interest rates variabel effect to wholesale price index in the long term, while the domestic interest rates effect in the short and long term. The effect of foreign prices on the wholesale price index is much larger in the short than in the long-term.

Date: 2020
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