Predictors of Exchange Rate Returns: Evidence from Indonesia

Bayu Arie Fianto, - and Nisful Laila, - and Raditya Sukmana, - and Muhammad Madyan, - (2020) Predictors of Exchange Rate Returns: Evidence from Indonesia. Buletin Ekonomi Moneter dan Perbankan, 23 (2). pp. 239-252. ISSN 1410-8046, E-ISSN: 2460-9196

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Abstract

Using historical time-series data, we investigate Indonesia’s exchange rate return predictability. We employ nine predictors, namely stock price, gold price, oil price, commodity price, inflation, balance of payment, total exports, the US T-bill rate, and the US federal fund rate. With historical data, we fail to discover any evidence that these factors predict Indonesia’s exchange rate returns. However, we find that oil price, commodity price, inflation, and the US T-bill rate can significantly predict Indonesia’s exchange rate returns during the Asian financial crisis. Our findings key implication is that it is the external factors that dominate the evolution of Indonesia’s exchange rate, and inflation rate is the only domestic factor for policy makers to control.

Item Type: Article
Uncontrolled Keywords: Exchange rate, Predictors, Inflation, External factors, Indonesia
Subjects: H Social Sciences
H Social Sciences > HG Finance
H Social Sciences > HG Finance > HG4501-6051 Investment, capital formation, speculation
H Social Sciences > HG Finance > HG4501-6051 Investment, capital formation, speculation > HG4551-4598 Stock exchanges
Divisions: 04. Fakultas Ekonomi dan Bisnis > Manajemen
Creators:
CreatorsNIM
Bayu Arie Fianto, -NIDN0010028503
Nisful Laila, -NIDN0007117101
Raditya Sukmana, -NIDN0013047605
Muhammad Madyan, -NIDN0004017104
Depositing User: Tn Sugeng Riyanto
Date Deposited: 13 Mar 2022 13:05
Last Modified: 21 Oct 2022 14:08
URI: http://repository.unair.ac.id/id/eprint/114069
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