INTEREST RATES AND THE ROLE OF EXCHANGE RATE REGIMES IN MAJOR SOUTHEAST ASIAN COUNTRIES

Paper ini meneliti apakah perbedaan sistim nilai tukar yang dianut oleh negara-negara Asia Tenggara mempunyai implikasi yang signifikan terhadap bagaimana gejolak pasar keuangan internasional ditransmisikan kedalam suku bunga domestik di negara-negara tersebut. Dengan menggunakan data dari 5 negara utama di Asia Tenggara - Indonesia, Malaysia, Filipina, Singapura, dan Thailand - kami menguji hipotesis bahwa tingkat suku bunga domestik dalam negara dengan sistim nilai tukar yang lebih fleksibel adalah lebih tidak terpengaruh oleh pasar keuangan internasional. Data yang digunakan adalah data harian dari Januari 1995 sampai dengan Desember 2003. Hasil estimasi menunjukkan bahwa sistem nilai tukar tidak mempunyai implikasi yang konklusif tentang bagaimana gejolak pasar keuangan internasional ditransmisikan ke dalam tingkat suku bunga domestik di negara-negara utama Asia Tenggara. Apapun sistem nilai tukar yang mereka anut, faktor domestik adalah merupakan faktor utama dalam pergerakan suku bunga domestik di negara-negara tersebut. Keywords:Exchange Rate Regimes, Interest Rates, Southeast Asia. JEL Classification: JEL Classification: E43, E52, F31, N1

COMMODITY PRICE AND INFLATION DYNAMICS: EVIDENCE FROM BRIICS

In this study, we use a commodity augmented Phillips curve to investigate the impact of global commodity prices on domestic inflation in Brazil, Russia, India, Indonesia, China, and South Africa. Oil and energy prices cause inflationary pressures in all countries, except Russia, where they cause deflationary pressures. In Indiaand Indonesia, global food prices are highly significant and positively related to inflation, while in South Africa precious metal prices impact inflation negatively. For policymakers, this study provides insights on the domestic adjustments required for inflation targeting in response to global commodity price volatility.In this study, we use a commodity augmented Phillips curve to investigate the impact of global commodity prices on domestic inflation in Brazil, Russia, India, Indonesia, China, and South Africa. Oil and energy prices cause inflationary pressures in all countries, except Russia, where they cause deflationary pressures. In Indiaand Indonesia, global food prices are highly significant and positively related to inflation, while in South Africa precious metal prices impact inflation negatively. For policymakers, this study provides insights on the domestic adjustments required for inflation targeting in response to global commodity price volatility

Estimating Equilibrium Real Exchange Rates of the Rupiah

In this paper we estimate equilibrium real exchange rate of the rupiah. Using quarterly data from 1993:Q1 to 2005:Q2, we find that productivity differential, terms of trade, and net foreign assets significantly determine the long-run equilibrium real exchange rate of the rupiah. In the short run, the change in the equilibrium real exchange rate is significantly determined by terms of trade, productivity differentials, net foreign assets, inflation differentials, and interest rate differentials. Based on the estimates of the equilibrium real exchange rate we find that in the period shortly before the 1997’s crisis, the actual real exchange rate of the rupiah overvalued substantially relative the equilibrium real exchange rate, and since 2004 the rupiah tends to overvalue, but to the extent that lower than the overvaluation before the crisis

Adjustments of the Non-Financial Sector to the Rise in Exchange Rate Volatility and Their Policy Implications in Indonesia

This paper presents evidence on exchange rate exposure of the returns of five non-financial sectors—agriculture, mining, consumer goods, basic industry, and manufacturing—in Jakarta Stock Exchange. The data covers the period from January 2000 to July 2006 with monthly frequency. Using different measures of industry-specific real exchange rates, the results of this paper show that none of the five sectors are significantly exposed to exchange rate fluctuations at 5 percent significance level. From an anecdotal survey of a sample of non-financial publicly traded firms, we find that the hedging strategy of the firms in facing exchange rate risk vary across firms. Some firms engage in hedging while others do not. Hedging instruments used by the hedged firms include forwards, swaps, and options. For non-hedged firms, the main reason for not hedging is that the cost of currency hedging is greater than its benefit

Exchange Rate Pass-Through into Import Prices: Empirical Evidences from Major Southeast Asian Countries

Most of the empirical studies on exchange rate pass-through focus on industrialized countries, and only a few studies have been done for developing countries. In this paper we estimate exchange rate pass-through for four Southeast Asian countries: Indonesia, the Philippines, Singapore and Thailand, by employing cointegration analysis and Error Correction Mechanism. The results of the estimation using quarterly data show that the long run exchange rate pass-through into import prices for Indonesia, the Philippines, Singapore, and Thailand are 0.983, 1.179, 0.200, and 0.800, respectively. When we use monthly data, the estimates of the long run exchange rate pass-through are 0.885, 1.529, 0.109, and 0.396 for Indonesia, the Philippines, Singapore, and Thailand, respectively. To compare exchange rate pass-through in Southeast countries with those of industrialized countries we estimate the exchange rate pass-through of Australia, Canada, and New Zealand. The exchange rate pass-through of Southeast Asian countries do not have systematic difference with the exchange rate pass-through of the sample of industrialized countries. Macro variables that appear to contribute to the variation of exchange rate pass-through across countries sample are inflation and money growth. From micro side, the presence MNCs together with intra-firm trade seems to have contribution for the variation of exchange rate pass-through across countries

Adjustments of the Non-Financial Sector to the Rise in Exchange Rate Volatility and Their Policy Implications in Indonesia

This paper presents evidence on exchange rate exposure of the returns of five non-financial sectors—agriculture, mining, consumer goods, basic industry, and manufacturing—in Jakarta Stock Exchange. The data covers the period from January 2000 to July 2006 with monthly frequency. Using different measures of industry-specific real exchange rates, the results of this paper show that none of the five sectors are significantly exposed to exchange rate fluctuations at 5 percent significance level. From an anecdotal survey of a sample of non-financial publicly traded firms, we find that the hedging strategy of the firms in facing exchange rate risk vary across firms. Some firms engage in hedging while others do not. Hedging instruments used by the hedged firms include forwards, swaps, and options. For non-hedged firms, the main reason for not hedging is that the cost of currency hedging is greater than its benefit

Estimating Equilibrium Real Exchange Rates of the Rupiah

In this paper we estimate equilibrium real exchange rate of the rupiah. Using quarterly data from 1993:Q1 to 2005:Q2, we find that productivity differential, terms of trade, and net foreign assets significantly determine the long-run equilibrium real exchange rate of the rupiah. In the short run, the change in the equilibrium real exchange rate is significantly determined by terms of trade, productivity differentials, net foreign assets, inflation differentials, and interest rate differentials. Based on the estimates of the equilibrium real exchange rate we find that in the period shortly before the 1997’s crisis, the actual real exchange rate of the rupiah overvalued substantially relative the equilibrium real exchange rate, and since 2004 the rupiah tends to overvalue, but to the extent that lower than the overvaluation before the crisis

Exchange Rate Pass-Through into Import Prices: Empirical Evidences from Major Southeast Asian Countries

Most of the empirical studies on exchange rate pass-through focus on industrialized countries, and only a few studies have been done for developing countries. In this paper we estimate exchange rate pass-through for four Southeast Asian countries: Indonesia, the Philippines, Singapore and Thailand, by employing cointegration analysis and Error Correction Mechanism. The results of the estimation using quarterly data show that the long run exchange rate pass-through into import prices for Indonesia, the Philippines, Singapore, and Thailand are 0.983, 1.179, 0.200, and 0.800, respectively. When we use monthly data, the estimates of the long run exchange rate pass-through are 0.885, 1.529, 0.109, and 0.396 for Indonesia, the Philippines, Singapore, and Thailand, respectively. To compare exchange rate pass-through in Southeast countries with those of industrialized countries we estimate the exchange rate pass-through of Australia, Canada, and New Zealand. The exchange rate pass-through of Southeast Asian countries do not have systematic difference with the exchange rate pass-through of the sample of industrialized countries. Macro variables that appear to contribute to the variation of exchange rate pass-through across countries sample are inflation and money growth. From micro side, the presence MNCs together with intra-firm trade seems to have contribution for the variation of exchange rate pass-through across countries

PERILAKU EKSPOR PERUSAHAAN MANUFAKTUR DI INDONESIA, 1990-2000

This paper examines export behaviour of manufacturing firms in Indonesia. We use firm-level data from survey of medium and large Indonesian manufacturing industries over the period 1990-2000. Using panel data regression technique, we find the following regularities. First, there is a persistency in the firm’s decision to export as well as proportion of exported output. Second, higher wage, larger number of production employment, higher productivity and higher share of foreign ownership lead to higher probability of a firm to export. Third, higher wage leads to higher proportion of exported output. However, higher productivity or higher share of foreign ownership leads to lower proportion of exported output. Fourth, while real exchange rate does not significantly affect the probability of firms to export, it significantly affects the proportion of exported output. Fifth, both probability to export and proportion of exported output was significantly much lower during the 1997/1998’s Asian crisis. Finally, looking at the export behaviour across industries, the estimation results show that there is a variation of export behavior across industries.Keywords: Export, manufacture, Indonesia.JEL Classification: F14, F13, D2

HAS FINTECH INFLUENCED INDONESIA’S EXCHANGE RATE AND INFLATION?

The digital financial services industry or financial technology (FinTech) has emerged in Indonesia in recent years. The FinTech industry, although disruptive, promises among other things to reduce costs of, and improve access to, financial services. This paper investigates the macroeconomic implications of FinTech companies in Indonesia over the period 1998-2017. In particular, we investigate the impact of FinTech on the Indonesian exchange rate (Rupiah vis-a-vis the US dollar) and the inflation rate. Our results suggest that FinTech is able to reduce inflation and lead to a real appreciation of the Rupiah against the US dollar, although its effect on the exchange rate is delayed. We explain our results and discuss future research directions in the paper