Exchange Rate Policy and Foreign Exchange Reserves Management in Indonesia in the Context of East Asian Monetary Regionalism

Reza Siregar and Ramkishen Rajan

No 2003-02, Centre for International Economic Studies Working Papers from University of Adelaide, Centre for International Economic Studies

Abstract: The first part of this paper examines the behaviour of rupiah over the last seven years (1996 - 2002) to ascertain whether in fact there is specific evidence of a return to de facto US dollar peg in Indonesia. To preview the main conclusion, we find evidence to suggest that this has been the case, hence justifying the need for accumulation of reserves by the Indonesian authorities. The next question that arises naturally from this is whether there is any way in which the liquidity yield from holding reserves may be generated without the need for Indonesia to continue to accumulate them. This is where a regional reserve pooling arrangement becomes relevant. But how might one judge the potential size of benefits of reserve pooling? This is the focus of the second part of the paper.

Keywords: Exchange Rate; Indonesia Rupiah; Reserves; US dollar; Volatility (search for similar items in EconPapers)
JEL-codes: F30 F32 F41 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2003-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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