The exchange rate of Rp/USD has experienced three regimes since 1967: fixed, managed float, and free float. During the period of 1967 – 1986, Rp/USD was devalued for 8 times by the authority to help maintain the external balance. The devaluations were part of the expenditure switching policy and moreover, were then considered the right policy to correct the misalignment of the Rp/USD real exchange rate. However it became clear that such approach to quell the Rp/USD real exchange rate misalignment always failed later on due to the inflation. After 1986, the Indonesian authority switched the exchange regime to the managed float, when the crawling pegged intervention band was set and adjusted from time to time to keep the real exchange rate healthy. That means the the central bank of Indonesia, Bank Indonesia, would have to defend the Rp/USD from time to time. It went smooth and successful at first, and the economic agents enjoyed the period of certainty in ! their business activities until the currency crisis took place in 1997. Thus, this thesis investigates the Rp/USD behavior during 1995 – 2005. We want to know how whether the efficient market hypothesis holds in the case of Rp/USD. Subsequently we want to know how the Rp/USD behaves in the past and how it will be likely to behave in the future. Finally, we are interested in the volatility of the Rp/USD and how it can be related to the volatility of the other currencies: Japanese Yen, Singapore Dollar, Thai Baht, and Philippine Peso.

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Erasmus University Rotterdam
Viaene, Prof. Dr. J-M. (promotor)
hdl.handle.net/1765/8297
Tinbergen Instituut Research Series
Erasmus School of Economics

Hardiyanto, A.V. (2007, January 11). Time Series Studies on Indonesian Rupiah/USD Rate: 1995-2005 (No. 390). Tinbergen Instituut Research Series. Erasmus University Rotterdam. Retrieved from http://hdl.handle.net/1765/8297