The influence of oil prices on indonesia's exchange rate

Seema Wati Narayan, Telisa Falianty, Lutzardo Tobing

Research output: Contribution to journalArticlepeer-review

12 Citations (Scopus)

Abstract

This study tests for a long-run relation between oil prices and the rupiah-US dollar exchange rate. We discover, first, that the long-run cointegration relation between oil prices and the real exchange rate (RER) is sensitive to different exchange rate regimes in Indonesia. Second, we find a long-run cointegrating relation between oil prices and the RER over the float exchange rate regime. However, in the managed float period, there is no evidence of a long-run relation between oil prices and the RER. In the long run, higher oil prices lead to an appreciation of the rupiah against the US dollar in the float period (post-August 1997 period). We demonstrate that these results are robust to different data frequencies.

Original languageEnglish
Pages (from-to)303-322
Number of pages20
JournalBuletin Ekonomi Moneter dan Perbankan
Volume21
Issue number3
DOIs
Publication statusPublished - 30 Jan 2019

Keywords

  • Cointegration
  • Exchange rate regime
  • Oil price
  • Real exchange rate

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