REAL EXCHANGE RATE MISALIGNMENTS: THE CASE OF THE INDONESIAN RUPIAH

  • Rasbin Rasbin Expertise Agency of The House of The Representatives of The Republic of Indonesia
  • Mohamad Ikhsan University of Indonesia
  • Beta Y Gitaharie University of Indonesia
  • Yoga Affandi Bank Indonesia, Indonesia
Keywords: Misalignments, Equilibrium real exchange rate, Real exchange rate, Synthetic control method

Abstract

This paper analyses the equilibrium price of the Indonesian Rupiah using the Synthetic Control Method (SCM) and assesses its misalignments. We find evidence of Rupiah misalignment, as the currency was undervalued for most periods, except for 1993-1996. This finding is robust across model specifications, predictors, and weighting. Our finding implies that keeping the exchange rate at its equilibrium level is ideal, and that policymakers can take advantage of the undervalued currency to promote economic growth via exports.

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Published
2021-09-30
How to Cite
Rasbin, R., Ikhsan, M., Gitaharie, B., & Affandi, Y. (2021). REAL EXCHANGE RATE MISALIGNMENTS: THE CASE OF THE INDONESIAN RUPIAH. Buletin Ekonomi Moneter Dan Perbankan, 24(3), 441 - 464. https://doi.org/10.21098/bemp.v24i3.1268
Section
Articles