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Scirj Volume V, Issue XI, November 2017 Edition
ISSN: 2201-2796

Is Real Exchange Rate of Indonesian Domestic Rupiah to USD Really Affected by Fiscal and Monetary Policy?

Akbar Mandela Arumattulabala Yunus, Muhammad Yunus Zain, Rahmatia, Amanus Khalifah Filardy Yunus, Munawwarah S. Mubarak

Abstract: This study attempts to examine the effect of fiscal and monetary policy on the real exchange rate of Indonesian domestic rupiah (IDR) to USD. The aim of this research is also to know whether the influence of the GDP growth difference between Indonesia and US can be considered to create misalignment on real exchange rate of IDR to USD. The data employed is secondary data from International Financial Statistic-IMF which processed by using Simultaneous Equation Model. The results showed that fiscal policy, i.e., tax received is negative and significant in overvalued real exchange rate (RER) and, on the other hand, government expenditure has positive and significant effect in undervalued RER. However, monetary policy, i.e., money supply (M1) has insignificant effect in overvalued RER, while the GDP growth difference between Indonesia and US is also not affecting to create misalignment of RER.

Reference this Paper: Is Real Exchange Rate of Indonesian Domestic Rupiah to USD Really Affected by Fiscal and Monetary Policy? by Akbar Mandela Arumattulabala Yunus, Muhammad Yunus Zain, Rahmatia, Amanus Khalifah Filardy Yunus, Munawwarah S. Mubarak published at: "Scientific Research Journal (Scirj), Volume V, Issue XI, November 2017 Edition, Page 80-83 ".

Search Terms: real exchange rate, GDP growth difference, fiscal and monetary policy

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