Dinar and Dirham As One Alternative Inflation Control Solution in Indonesia

Budi Martono

MPRA Paper from University Library of Munich, Germany

Abstract: The phenomenon of soaring inflation and the depreciation of a country's currency has become a factual discussion on several discussions of economic disciplines. In the context of the rupiah exchange rate, an empirical fact explains that in some periods, the currency of the Republic of Indonesia, the rupiah, continued to weaken against the currencies that became references such as USD and Euro. It becomes interesting when you notice that some countries have the same profile as Indonesia, a currency issue becomes a global issue. Especially when we notice that the weakening of a country's currency will correlate in line with the soaring increase in inflation in a country. The economic growth of a country is influenced by several factors including the positive trade balance, significant GDP growth, and in some areas, a stable currency. It is common knowledge, that Indonesia as a country that has a high dependence on imports, always faces endless conditions when its import payments must be made using the dollar or euro. The amount issued by IDR to buy 1 USD is now almost reaching Rp. 15,000. Inevitably, the country's foreign exchange reserves as a barometer of a nation's economic strength when facing a crisis become a challenge. The need for a very high USD currency from large corporations and profit-seeking individuals from currency buying and selling transactions, adding to the burden of the IDR became even more severe which in turn also affected the soaring inflation.

Keywords: Dinar and Dirham; Alternative; Inflation Control Solution. (search for similar items in EconPapers)
JEL-codes: E25 E4 E41 E42 E52 G2 (search for similar items in EconPapers)
Date: 2019-07-12
New Economics Papers: this item is included in nep-isf, nep-mac, nep-mon and nep-sea
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