The tendency of repeating history has made any financial crisis a valuable source to be explored and studied. It will make people be more prepared and ready to anticipate. This paper examined the nature of linkages between exchange rate and macroeconomic fundamentals over
1997-2004. It investigated the evidence on both the short- and long-run effects of exchange rate determinant factors using co-integration theory. It also explored the stability of rupiah during the pre and post economic crisis, seeking whether the Indonesian currency was overshooting or not. To test the stability of rupiah after monetary and fiscal liberalization, we employed the Chow test. The results revealed that the rupiah was overshooting during the crisis' period and there was a structural change of rupiah after 1998. Due to the significant effects of interest rate and exchange rate on the currency stability, it is important to the Indonesia’s monetary institution to be aware of these two variables, especially in stabilizing the economic performance after the financial liberalization. The elasticity obtained for relative money supply (m) is greater than unity indicating that this result consistent with overshooting hypothesis.
The objective of this paper is to test the exchange rate dynamics by measuring the speed of adjustment of prices. In this overshooting model, we assume price stickiness (gradual adjustment). If the prices are adjusted instantaneously, we will have the monetarist view; otherwise, the overshooting one, due to slow adjustment of prices and consequently, it affects all the other variables and slowly the exchange rate. We outline, here, an approach of testing the dynamic models of exchange rate determination. This approach is based upon the idea that it is difficult to measure directly the process by which market participants revise their expectations about current and future money supplies. On the other hand, it is possible to make indirect inferences about these expectations through a time series analysis of related financial and real prices. Empirical tests of the above exchange rate dynamics are taking place for four different exchange rates ($/€, $/£, C$/$, and ¥/$). Theoretical discussion and empirical evidence have emphasized the impact of gradual adjustment and “overshooting” that it is taking place. Only for the $/€ exchange rate the monetarist model is correct.
A study on the impact of global currency fluctuations with a special focus to...Aman Vij
The paper discusses about the factors influencing and impact of currency fluctuations on global economy. Then we shift our focus to Indian rupees factors which causes the Rupee fluctuations has been discussed. In the end we discuss about the steps taken by the RBI and the government and what else can be done by investors to lessen the impact of Global currency fluctuations and what can be done to prevent Indian Rupee fluctuation.
Macroeconomic stability in the DRC: highlighting the role of exchange rate an...IJRTEMJOURNAL
This study is part of a macroeconomic approach and seeks to identify the role of the rate of
economic growth and the exchange rate in controlling the macroeconomic framework. The approaches adopted
in this paper are part of Keynesian thinking on macroeconomic stability using the macroeconomic stability
index proposed by Burnside and Dollars (2004) and A. Amine (2005). Our results argue that economic growth
is causing macroeconomic stability and that the exchange rate is negatively and significantly accounting for
macroeconomic stability in the Democratic Republic of Congo.
The objective of this paper is to test the exchange rate dynamics by measuring the speed of adjustment of prices. In this overshooting model, we assume price stickiness (gradual adjustment). If the prices are adjusted instantaneously, we will have the monetarist view; otherwise, the overshooting one, due to slow adjustment of prices and consequently, it affects all the other variables and slowly the exchange rate. We outline, here, an approach of testing the dynamic models of exchange rate determination. This approach is based upon the idea that it is difficult to measure directly the process by which market participants revise their expectations about current and future money supplies. On the other hand, it is possible to make indirect inferences about these expectations through a time series analysis of related financial and real prices. Empirical tests of the above exchange rate dynamics are taking place for four different exchange rates ($/€, $/£, C$/$, and ¥/$). Theoretical discussion and empirical evidence have emphasized the impact of gradual adjustment and “overshooting” that it is taking place. Only for the $/€ exchange rate the monetarist model is correct.
A study on the impact of global currency fluctuations with a special focus to...Aman Vij
The paper discusses about the factors influencing and impact of currency fluctuations on global economy. Then we shift our focus to Indian rupees factors which causes the Rupee fluctuations has been discussed. In the end we discuss about the steps taken by the RBI and the government and what else can be done by investors to lessen the impact of Global currency fluctuations and what can be done to prevent Indian Rupee fluctuation.
Macroeconomic stability in the DRC: highlighting the role of exchange rate an...IJRTEMJOURNAL
This study is part of a macroeconomic approach and seeks to identify the role of the rate of
economic growth and the exchange rate in controlling the macroeconomic framework. The approaches adopted
in this paper are part of Keynesian thinking on macroeconomic stability using the macroeconomic stability
index proposed by Burnside and Dollars (2004) and A. Amine (2005). Our results argue that economic growth
is causing macroeconomic stability and that the exchange rate is negatively and significantly accounting for
macroeconomic stability in the Democratic Republic of Congo.
In monetary economics, the quantity theory of money (QTM) states that the general price level of goods and services is directly proportional to the amount of money in circulation, or money supply. The theory was challenged by Keynesian economics,but updated and reinvigorated by the monetarist school of economics. While mainstream economists agree that the quantity theory holds true in the long run, there is still disagreement about its applicability in the short run. Critics of the theory argue that money velocity is not stable and, in the short-run, prices are sticky, so the direct relationship between money supply and price level does not hold.
Alternative theories include the real bills doctrine and the more recent fiscal theory of the price level.
Determination of exchange rate chapter 6Nayan Vaghela
Determination of exchange rate, mint par theory, balance of payment theory, Purchasing power parity theory, Absolute version and relative version, Criticisms
1) Statement to Quantity Theory of Money
2) Graph illustration and Pictorial description of QTM
3) Different Approaches to QTM
4) Fisher's Transaction Approach Description
5) Assumptions of Fisher's Transaction Approach
6) Conclusion
This study modeled volatility and daily exchange rate movement in Nigeria with daily exchange rate between Nigeria Naira and US Dollar from January 2, 2001 to May 20, 2019 collected from the Central Bank of Nigeria (CBN). The results of the estimated models revealed that conditional variance (volatility) has positive and significant relationship with exchange rate returns between Nigeria Naira and US Dollars, which corroborates the theory that predicts positive relationship between return and volatility for risk averse investors. Also found that exchange rate volatility between Naira / US Dollar is persistent. It was also discovered that goods news produces more volatility than bad news of equal magnitude. The researchers therefore suggested that the Central Bank of Nigeria should always proffer timely intervention to reduce the volatility persistence. This will go a long way to counteract or moderate the excess volatility between Naira and US Dollar transactions.
Money: Definition, Origin, Functions, Inflation, Deflation, Value of Money, M...flowerpower_1324
These slides cover the first chapter of the B.Com "Banking and Finance" syllabus: Money.
It includes the following topics: Definition, Origin, Functions, Inflation and its remedies, , Deflation and its causes, reflation, devaluation, , Monetary and Fiscal Policy, Paper Money: its kinds and advantages and disadvanatges, Monetary system, Value of Money: quantity theory of money, cash balance approach, modern theory of money.
In monetary economics, the quantity theory of money (QTM) states that the general price level of goods and services is directly proportional to the amount of money in circulation, or money supply. The theory was challenged by Keynesian economics,but updated and reinvigorated by the monetarist school of economics. While mainstream economists agree that the quantity theory holds true in the long run, there is still disagreement about its applicability in the short run. Critics of the theory argue that money velocity is not stable and, in the short-run, prices are sticky, so the direct relationship between money supply and price level does not hold.
Alternative theories include the real bills doctrine and the more recent fiscal theory of the price level.
Determination of exchange rate chapter 6Nayan Vaghela
Determination of exchange rate, mint par theory, balance of payment theory, Purchasing power parity theory, Absolute version and relative version, Criticisms
1) Statement to Quantity Theory of Money
2) Graph illustration and Pictorial description of QTM
3) Different Approaches to QTM
4) Fisher's Transaction Approach Description
5) Assumptions of Fisher's Transaction Approach
6) Conclusion
This study modeled volatility and daily exchange rate movement in Nigeria with daily exchange rate between Nigeria Naira and US Dollar from January 2, 2001 to May 20, 2019 collected from the Central Bank of Nigeria (CBN). The results of the estimated models revealed that conditional variance (volatility) has positive and significant relationship with exchange rate returns between Nigeria Naira and US Dollars, which corroborates the theory that predicts positive relationship between return and volatility for risk averse investors. Also found that exchange rate volatility between Naira / US Dollar is persistent. It was also discovered that goods news produces more volatility than bad news of equal magnitude. The researchers therefore suggested that the Central Bank of Nigeria should always proffer timely intervention to reduce the volatility persistence. This will go a long way to counteract or moderate the excess volatility between Naira and US Dollar transactions.
Money: Definition, Origin, Functions, Inflation, Deflation, Value of Money, M...flowerpower_1324
These slides cover the first chapter of the B.Com "Banking and Finance" syllabus: Money.
It includes the following topics: Definition, Origin, Functions, Inflation and its remedies, , Deflation and its causes, reflation, devaluation, , Monetary and Fiscal Policy, Paper Money: its kinds and advantages and disadvanatges, Monetary system, Value of Money: quantity theory of money, cash balance approach, modern theory of money.
Rural Area Development Strategy through Rural Infrastructure Development ProgramSuwandi, Dr. SE.,MSi
This study was conducted in Biak District of Papua employing the quantitative method. The strategic concept in the development of local institutional capacity was to maximise the role of institutions as social capital not taken over, such as driving as farmers’ cooperatives, cooperatives as agro-tourism objects, and integrating the local institutional system under the auspices of Papua local institutions.
Graph Theoretic Approach to Describing Regional Economic StructurePenn State University
Presentation by Rose M. Baker and David L. Passmore (Penn State) at the 26th Annual Regional Economic Models, Inc., Users' Conference, Lake Tahoe, Incline Village, Nevada, on October 13, 2011.
Structure and Economic Development Pattern in Jayapura through other Cities a...Suwandi, Dr. SE.,MSi
This research aims to: (1) determine the economic performance of Jayapura City or Cities and Towns in Papua viewed from economic growth aspect and the contribution of the local economy, (2) identify the potential sectors of economy in Jayapura City, (3 ) analyze the dominant sector in terms of the economy in Jayapura City. The data obtained from interviews staffs of Centre Bureau of Statistics (BPS) based on the Gross Domestic Product (GDP), and the related documents. The analytical tool used was Typology Analysis of Klassen, Location Quotient (LQ) and Shift Share. The results of this study: the construction sector is included in the prime sector qualification in which this is caused by the growth rate of the construction sector Jayapura City larger than the building sector at provincial level in Papua. The potential sector qualificatios are: transportation and communication, agriculture, services, electricity, water and financial. The mining and quarrying sectors, trade and industry are the growing sector qualifications. The superior category are: agriculture, manufacturing, electricity and water supply, construction, trade, and transport and communications.
Abstract: The theoretical relationship of the long-run equilibrium between real exchange rates and interest rate differentials is essentially derived from the Purchasing Power Parity (PPP) and the uncovered interest parity. However, empirical evidence on this long-run relationship has rather been inconclusive. While several authors are able to establish the long-run relationship between real exchange rates and interest rate differentials other could not found this relationship. The reason for lack of relationship in some of the studies is as a result of omitted variables (Meese and Rogoff, 1988). Therefore, attempt is made in this study to evaluate this relationship between real exchange rate and interest rate differential for the case of Nigeria by controlling for foreign exchange reserves. The paper uses monthly data for the period 1993:1-2012:12 and applies Autoregressive Distributed Lags (ARDL) model. The estimates suggest the existence of long-run relationship between real exchange rate, interest rate differential and foreign exchange reserves. In the long run, the exchange rate coefficient has a positive effect on the foreign reserves. However, the effect of interest rate differential is negative and statistically significant. On the short run dynamics, the finding indicates a non-monotonic relationship between real exchange rate, interest rate differential and foreign exchange reserves. The out-of-sample forecast indicates a better forecast using ARMA model as all Theil coefficients are close zero for all the horizons used in the model.
The theoretical relationship of the long-run equilibrium between real exchange rates and interest rate differentials is essentially derived from the Purchasing Power Parity (PPP) and the uncovered interest parity. However, empirical evidence on this long-run relationship has rather been inconclusive. While several authors are able to establish the long-run relationship between real exchange rates and interest rate differentials other could not found this relationship. The reason for lack of relationship in some of the studies is as a result of omitted variables (Meese and Rogoff, 1988). Therefore, attempt is made in this study to evaluate this relationship between real exchange rate and interest rate differential for the case of Nigeria by controlling for foreign exchange reserves. The paper uses monthly data for the period 1993:1-2012:12 and applies Autoregressive Distributed Lags (ARDL) model. The estimates suggest the existence of long-run relationship between real exchange rate, interest rate differential and foreign exchange reserves. In the long run, the exchange rate coefficient has a positive effect on the foreign reserves. However, the effect of interest rate differential is negative and statistically significant. On the short run dynamics, the finding indicates a non-monotonic relationship between real exchange rate, interest rate differential and foreign exchange reserves. The out-of-sample forecast indicates a better forecast using ARMA model as all Theil coefficients are close zero for all the horizons used in the model.
Abstract The main purpose of this paper is to investigate whether stock prices and exchange rates are related to each
other or not. Both the short term and the long term association between these variables are discovered. The study applies
monthly and quarterly data on two gulf countries, including Kingdom Saudi Arabia (KSA) and United Arab Emirate (UAE)
for the period January 2008 to December 2009. The results of this study in the short term found that the exchange rate
influence positively on the stock market price index for United Arab Emirate and there is no association between them for
Kingdom Saudi Arabia. Moreover the study in the long term found that the exchange rate influence negatively on stock
market price index for the United Arab Emirate. While no association between these variables in Kingdom Saudi Arabia.
International movements-meaning-Export & import of merchandise & services-International investment-International Payments, Rate of exchange, Economic integration
The main purpose of this study is to examine if the International Fisher Effect holds between Mexico and the United States for the period from Q1: 2005 through Q3: 2016. The results of the test indicate a significant relationship between the interest rate differentials and the changes in the currency value between the two countries. The finding of this study is consistent with some of the earlier research while signifying the importance of other variables in improving the explanatory power of the independent variable.
Exchange Rate Overshooting and its Impact on the Balance of Trade for the Tur...Hüseyin Tekler
Exchange rate overshooting is the short run phenomenon under the Dornbusch Model presented in 1976. We are really desiderative to find out whether the overshoots are for the short run or for the long run period for the Turkish economy. The estimated result using the Johansen Julius method and VECM, we have found that overshooting is for the short run period as opposed to the findings of Bahmani-Oskooee & Orhan (2000) while the Purchasing power parity [PPP] does not hold for the Turkish economy.
BBA 2401, Principles of Macroeconomics 1 Learning Obj.docxarnit1
BBA 2401, Principles of Macroeconomics 1
Learning Objectives
Upon completion of this unit, students should be able to:
1. Describe the relationship between the demand and supply of money.
2. Explain how changes in the money supply affect aggregate demand in
the short run.
3. Explain how changes in the money supply affect aggregate demand in
the long run.
4. Evaluate targets for monetary policy.
5. Compare an active policy and a passive policy.
6. Explain the Phillips curve.
Written Lecture
Monetary theory is concerned with the effects of the quantity of money on the
economy's price level and the level of real output. There is considerable debate
among economists concerning what these effects are. One difficulty in
determining the effects is that monetary policy changes and fiscal policy
changes often occur at the same time, so it is difficult to sort out the effects of
one from those of the other. This chapter describes two views of how money
affects the economy: a short-run view and a long-run view.
The Demand and Supply of Money
A person's demand for money is not the same as the person's desire for a
greater income. When economists speak of a demand for money, they are
referring to the desire to hold a particular amount of money, either in checking
accounts or as cash. That is, the demand for money is a demand to hold a
stock of money at a particular time. Since money is used to facilitate exchange
of goods and services and people engage in exchange on a regular basis,
people hold money balances. The demand for money is greater the greater the
number of transactions (as measured by real GDP) and the higher the average
price at which each good is sold, that is, the greater nominal GDP.
Money also competes with other financial assets as a store of wealth.
Compared with other financial assets, money has one major advantage and
one major disadvantage. Money's advantage is its liquidity—it can be directly
exchanged for goods and services. Its disadvantage is that it earns either no
interest or substantially less interest than other financial assets. The
opportunity cost of holding money is the additional interest that could have
been earned by using the money to buy alternative interest-bearing financial
assets. Consequently, the cost of holding money increases with the real
interest rate, and we expect the demand for money to vary inversely with the
real interest rate, other things being constant. That is, the demand curve for
money slopes downward when real interest rates are on the vertical axis.
Reading
Assignments
Chapter 16:
Monetary Theory and
Policy
Chapter 17:
Macro Policy Debate:
Active or Passive?
Supplemental
Reading
Click here to access a
PDF of the Chapter 16
Presentation.
Click here to access a
PDF of the Chapter 17
Presentation.
Learning Activities
(Non-Graded)
See information below.
Key Terms
1. Decision-making lag
2. De ...
Empirical literature on money demand is mainly based on the estimation of a long run relation by means of time-invariant cointergration approach. Taiwan has experienced the economic and financial regime change since 1979. The purpose of this paper is to test structural breaks in Taiwan long run money demand equation. We examine six of the most influential specifications proposed in the literature. The classical set of explanatory variables (e.g. income and interest rates) is extended on the base of a number underlying economic reasons related to financial, labor and international portfolio characteristics. The results suggest that international financial market variables and the classical specifications are the key determinants of structural instability observed in Taiwan broad money.
THE EFFECT OF FINANCIAL CRISES ON THE ENTROPY EVOLUTION OF FOREIGN EXCHANGE R...ijitjournal
This study investigates the possible effect of financial crises on foreign exchange markets, where entropy
(using the time-dependent block entropy method) for different exchange rates is measured. Results suggest
that financial crises are associated with significant increase of exchange rate entropy especially in US and
Hongkong currencies, reflecting instability in FX market dynamics. Moreover, for most of the currencies
studied, increase of exchange rate entropy was observed after a period of financial crisis. In addition,
empirical results show that periods of economic uncertainty are led by periods of low entropy values,
which might serve as indicator for anticipating the inception of financial crises.
Exchange Rate Theories – Derivatives – Forward Rate Agreements – Currency Futures and Interest Futures - International Banking – Role of IMF in International Liquidity – International Institutions – World Bank.
This paper analysed the forecasting ability of yield-curve as a predictor of the short-run fluctuations in economic activities in Namibia. The study employed the techniques of unit root, cointegration, impulse response functions and forecast error variance decomposition on the quarterly data covering the period 1996 to 2015. The results revealed a negative relationship between the term structure of interest rates and economic activities, though statistically insignificant. This suggests that the yield-curve has no forecasting ability as a predictor of economic activity in Namibia.
Impact of Inflation and GDP Of India And the United States on Its Foreign Exc...GurpreetSingh1986
- As various countries are now getting global and are opening their market for foreign companies, various
investors are investing in those countries, which means the demand for currency is increasing, affecting the
currency exchange rate.
In this research paper, the author tries to establish the relation between macroeconomic variables like
Inflation and GDP on the currency exchange rate. The author has collected the secondary data of Inflation rate
and GDP and tries to see its relationship with the currency exchange rate system. The author has used a correlation
and regression model to analyze the relationship between the dependent and independent variables.
Similar to The Linkages of Financial Liberalization and Currency Stability: What do we learn from Pre and Post Asian Financial Crisis? (20)
STUDY ON APPROPRIATE TECHNOLOGY–BASED LOCAL ECONOMIC DEVELOPMENT IN BIAK REGE...Suwandi, Dr. SE.,MSi
This research is conducted in Biak Regency under the following objectives: (1) to find out the economic performance of Biak Regency with Regencies/ Cities in Papua viewed from economic growth aspect and the contribution of regional economic sector, (2) to identify potential sectors in the economy of Biak Regency, and (3) to analyze the leading sector in the economy of Biak Regency viewed from the economic structure of Papua Province. This research uses primary and secondary data. The primary data is obtained from the result of interview with BPS staffs of Papua Province and Biak Regency concerning PDRB. Meanwhile, the secondary data is collected from any documents related to the Analytical Tools used in this research, namely Analysis of Klassen Typology, Location Quotient (LQ) and Shift Share. The result of this research shows that there are economic potentials based on appropriate technology which can be developed in Biak Regency, and one of them is sea fishery. The fish production which mainly produced is tuna fish and cekalang fish. The center of capture fisheries in Biak Regency is located in the District of Biak Utara, Timur, Barat, and Biak Kota.
Keywords: PDRB, Klassen Typology, Location Quotient (LQ), Shift Share.
Jornal of Social and Development Sciences (JSDS) Vol. 6, No. 3, September 201...Suwandi, Dr. SE.,MSi
Journal of Social and Development Sciences (JSDS) is a scholarly journal deals with the disciplines of social and development sciences. JSDS publishes research work that meaningfully contributes towards theoretical bases of contemporary developments in society, business and related disciplines. The work submitted for publication consideration in JSDS should address empirical and theoretical contributions in the subjects related to scope of the journal in particular and allied theories and practices in general. Scope of JSDS includes: sociology, psychology, anthropology, economics, political science, international relations, linguistics, history, public relations, hospitality & tourism and project management. Author(s) should declare that work submitted to the journal is original, not under consideration for publication by another journal, and that all listed authors approve its submission to JSDS. It is JSDS policy to welcome submissions for consideration, which are original, and not under consideration for publication by another journal at the same time. Author (s) can submit: Research Paper, Conceptual Paper, Case Studies and Book Review. The current issue of JSDS consists of papers of scholars from Malaysia, Indonesia, Nigeria and Pakistan. Political communication, economic community, human development index, economic inequality, payment systems & money laundering, government spending & per capita income, branding social marketing services & criminal recidivism were some of the major practices and concepts examined in these studies. Journal received research submission related to all aspects of major themes and tracks. All the submitted papers were first assessed by the editorial team for relevance and originality of the work and blindly peer reviewed by the external reviewers depending on the subject matter of the paper. After the rigorous peer-review process, the submitted papers were selected based on originality, significance, and clarity of the purpose. Current issue will therefore be a unique offer, where scholars will be able to appreciate the latest results in their field of expertise, and to acquire additional knowledge in other relevant fields.
Rural Area Development Strategy through Rural Infrastructure Development ProgramSuwandi, Dr. SE.,MSi
This study was conducted in Biak District of Papua employing the quantitative method. The strategic concept in the development of local institutional capacity was to maximise the role of institutions as social capital not taken over, such as driving as farmers’ cooperatives, cooperatives as agro-tourism objects, and integrating the local institutional system under the auspices of Papua local institutions.
The Impact of the Utilization of Riparian Area for Settlements (Case Study of...Suwandi, Dr. SE.,MSi
The limitedness of area and plot of land in Jayapura City which are allocated for settlements has become a problem in Jayapura city. Population growth and high-rate of urbanization are impacted on the utilization of land which is not in accordance with its allocation. The modification of riparian area on the right and left sides of the river for settlements has reduced the function of the river, because in addition to river conservation, river has a double role as the securer of water source and as the protector of its surrounding area. Therefore, riparian area becomes more important to be considered. The riparian area in settlement area is assumed to be adequate for a 10-15 meters inspection road to be built on. The real condition of the rivers in North Jayapura District of Jayapura City, compared to the criteria of riparian area for settlement area, has not been inappropriate. The river’s function as the protector of its surrounding area has gone astray. If there is someday a flood, the impact may cause material damage or even life victims.
The Impact of Mining Activities on Regional Development of Pegunungan Bintang...Suwandi, Dr. SE.,MSi
Pegunungan Bintang Regency is an autonomous region which was formed in 2001 with great potential of
natural resources in mining, including coal, oil, and gas. Mineral is a non-renewable natural resource the
management of which may pose positive impacts or negative impacts. Therefore, the management of mineral must be done wisely in order to give optimum benefits to the regional development and the people residing in the vicinity of the mine. In connection with the foregoing, the study aimed at analyzing the impact of mining activities on regional development, among others, economic growth, community development, and suitability of space utilization. The analysis results showed that mining activities contributed greatly to regional development, as reflected in the structure of regional economy.
THE EFFECT OF FISCAL DECENTRALIZATION AND PAPUA SPECIAL AUTONOMY AGAINST DIRE...Suwandi, Dr. SE.,MSi
The aim of this study was to understand and analyze the significance of the influence of The Fiscal Decentralization and Papua Special Autonomy against Direct expenditure of district / city governments in Papua. Results of analysis and hypothesis testing, concluding that the Fiscal Decentralization effects, fiscal decentralization is intended to finance the implementation of the tasks of government, public services and regional development. In the structure regionl expenditure, the direct budget includes (1) personnel expenditure (temporary honor); (2) goods and services expenditures; and (3) capital expenditure. Thus, large-small fiscal decentralization will directly influence significantly to direct expenditure of district / city governments. The influence of fiscal decentralization of funds from the central government to direct expenditure of district / city significantly, on the one hand implies that fiscal decentralization policy tends to improve further fiscal dependence on government expenditure of district / city towards decentralization of central funds. In other words, direct expenditure by the district / city government is still relying on the reception of funds transfers from the central government. But on the other hand, the effects of fiscal decentralization of funds towards direct expenditure significantly implies that local governments have been able to manage fiscal decentralization funds for the purpose of increasing investment pemerintah. One of component in direct expenditures are capital expenditures that are necessary in the process of accelerating developments of district. Increased expenditure on capital goods as a result of an increase in funding for fiscal decentralization, is expected to enlarge in the district
ANALYSIS OF CONSUMPTION BEHAVIOR DIFFERENCES BETWEEN LOCAL FARMERS AND MIGRAN...Suwandi, Dr. SE.,MSi
The aims of this research are; (1) long term purposes: to improve the food security for Papuan farmers, and reduce the economic gap between Papuan and the migrants population, since the socio-economic jealousy has been happening. (2) For the short term purposes areanalyzing the differences between the consumption behavior of Papuan and the migrant farmers. The analysis method used is quantitative analysis. The results shows that there is the difference between the consumption behavior of Papuan farmersand migrant farmers in fulfilling the needs of food consumption. Papuan farmers’ share of expenditure is 61.52%, while the migrant farmers’ is 45.68%. When the income increased by 100%, the spending behavior of Papuan farmers decreased by 57.3%, and 33.7% decreased for the migrants. There is the difference of consumption behavior between the local farmers and the migrant farmers in fulfilling the needs of non-food consumption. The share of expenditure for local farmers only 38.48%, while migrant farmers is 54.32%. If the household income increased by 100%, the spending behavior of local farmers increased by 58.3%, and 29.2% decreased for the migrant farmers.
Analysis Of Influence Of Spatial Planning On Performance Of Regional Developm...Suwandi, Dr. SE.,MSi
The various problems in regional spatial planning in Waropen District, Papua, shows that the Spatial Planning (RTRW) of Waropen District, Papua, drafted in 2010 has not had a positive contribution to the settlement of spatial planning problems. This is most likely caused by the inconsistency in the spatial planning. This study tried to observe the consistency of spatial planning as well as its relation to the regional development performance. The method used to observe the consistency of the preparation of guided Spatial Planning (RTRW) is the analysis of comparative table followed by analysis of verbal logic. In order to determine if the preparation of Spatial Planning (RTRW) has already paid attention on the synergy with the surrounding regions (Inter-Regional Context), a map overlay was conducted, followed by analysis of verbal logic. To determine the performance of the regional development, a Principal Components Analysis (PCA) was done. The analysis results showed that inconsistencies in the spatial planning had caused a variety of problems that resulted in decreased performance of the regional development. The main problems that should receive more attention are: infrastructure, development growth, economic growth, transportation aspect and new properties.
Structure and Economic Development Pattern in Jayapura through other Cities a...Suwandi, Dr. SE.,MSi
This research aims to: (1) determine the economic performance of Jayapura City or Cities and Towns in Papua viewed from economic growth aspect and the contribution of the local economy, (2) identify the potential sectors of economy in Jayapura City, (3 ) analyze the dominant sector in terms of the economy in Jayapura City. The data obtained from interviews staffs of Centre Bureau of Statistics (BPS) based on the Gross Domestic Product (GDP), and the related documents. The analytical tool used was Typology Analysis of Klassen, Location Quotient (LQ) and Shift Share. The results of this study: the construction sector is included in the prime sector qualification in which this is caused by the growth rate of the construction sector Jayapura City larger than the building sector at provincial level in Papua. The potential sector qualificatios are: transportation and communication, agriculture, services, electricity, water and financial. The mining and quarrying sectors, trade and industry are the growing sector qualifications. The superior category are: agriculture, manufacturing, electricity and water supply, construction, trade, and transport and communications.
The Influence of Economic Growth on Poverty, Investment, and Human Developmen...Suwandi, Dr. SE.,MSi
This paper discusses about the economic growth that has a direct impact on Human Development Index (HDI) and indirect one on the increase of investment absorption and decrease of poverty. Besides, we can know that economic growth has a direct impact on the increase of investment, as well as it directly affects the decrease of poverty level by using partial test quantitative analysis. To increase the economic growth and reduce poverty as well as to increase HDI, these are what to do (a) revitalizing the agriculture to help main sector of Fak Fak district (agriculture); (b) giving modal such as: banking soft loan with easy terms and revolving fund for the right target in the form of natura (cows, sheeps, etc.) that can accelerate the increase of economic; (c) regional government facilitates the linkage and partnership program with “win-win solution” concept.
Fiscal Decentralization and Special Local Autonomy: Evidence from an Emerging...Suwandi, Dr. SE.,MSi
The quest of searching the endogeny variables of financial decentralization in emerging markets have become a serious topic due to the increasing wave of decentralized regions in many countries. The paper aimsto examine the effects of fiscal decentralization and specific local autonomy on economic growth, employment, poverty, and welfare in the special province Papua (Indonesia). The study exploited the main data of the decentralization fund by using a panel data of eight regencies and municipals, particularly the regional autonomy fund, direct and indirect government expenditure, and economic growth. The paper used the path analysis to explore the relationships of the observed variables. The results revealed that the decentralization fund influenced significantly on government’s direct expenditure and economic growth. The special local autonomy's fund has influenced considerably on government’s indirect expenditure. Its effect has increased, through economic growth as the intermediating variable, meaningfully on employment, poverty, and welfare. The results are in line with the prior studies, which explore the consequences of decentralization and specific autonomy to spur the economic growth in certain regions. It implies that the economic development strategies in Indonesia’s less-developed regions should be started with a bigger autonomy transfer program to those regions and simultaneously enhanced it by special budget allocation to trigger and support the development.
CULTURAL DEVELOPMENT MODEL Pakas Anim Leadership System Inside A Concept of V...Suwandi, Dr. SE.,MSi
The latest trend reveals that the model of cultural assistance in the development and analysis of information and technology of communication. Culture model with a traditional village governance system is a powerful tool to guide the development of Papua. This study examines the construction of Pakas anim-ism cultural model, which evolved from a historical and anthropological analysis of instructional products designed by and for Papua. Extrapolated finding from the analysis revealed a cultural context. The cultural context provides evidence of how the culture of an instructional product development embodied in Papua, especially for practicioners with pakas-anim leadership system for Malin anim people who live along the coast and the inland Merauke (Wendu, Buti, Wayau, Koa.). This data is more specific for the village development planners, therefore the design factor of development villages planning in Papua through cultural analysis is important to note. Pakas anim-ism model, one among many development models based on culture is the framework of instructional design that guides the designer through the design, management, development, and assessment processes with regard explicit of cultural context as consideration in planning the development of Papua in general, and in particular regarding to the Malin anim people in Merauke regency.
REVIEW ON THE OPINIONS ABOUT THE APLICATION OF DIMINISHING RETURNS LAWSuwandi, Dr. SE.,MSi
The importance of human needs upon food causes an opinion that agricultural sector is a productive sector with its surplus between the production and consumption results. The role of land is very essential for realizing the fulfilment of food needs. The combination between land and other production factors will result in food.
The economic thinkers from Physiocracy and Classical School stated that a theory on land rent which initially found in the framework of Turgot (1766) and David Ricardo (1821), as well as Thomas Robert Malthus (1820), brought a consequence on the application of Diminishing Returns law in agricultural production.
The objective of this study is determining and analysing the effect of regional expansion, infrastructure development and productive economic activities toward people welfare in South Sorong. It is also conducted in order to know and analyze the dominant program on the people welfare in South Sorong. This research was conducted in South Sorong with quantitative and qualitative data applying multiple regression analysis. Regression analysis result showed that there is a significant relationship on variable regional expansion with people welfare in South Sorong-Papua. The development of infrastructure has a significant influence on people welfare in South Sorong-Papua. Productive economic activities also have an influence on people welfare in South Sorong-Papua. Partial analysis testing result discovers that infrastructure development factor has dominant effects on people welfare compared to the factors of regional expansion program and productive economic business.
2024.06.01 Introducing a competency framework for languag learning materials ...Sandy Millin
http://sandymillin.wordpress.com/iateflwebinar2024
Published classroom materials form the basis of syllabuses, drive teacher professional development, and have a potentially huge influence on learners, teachers and education systems. All teachers also create their own materials, whether a few sentences on a blackboard, a highly-structured fully-realised online course, or anything in between. Despite this, the knowledge and skills needed to create effective language learning materials are rarely part of teacher training, and are mostly learnt by trial and error.
Knowledge and skills frameworks, generally called competency frameworks, for ELT teachers, trainers and managers have existed for a few years now. However, until I created one for my MA dissertation, there wasn’t one drawing together what we need to know and do to be able to effectively produce language learning materials.
This webinar will introduce you to my framework, highlighting the key competencies I identified from my research. It will also show how anybody involved in language teaching (any language, not just English!), teacher training, managing schools or developing language learning materials can benefit from using the framework.
Acetabularia Information For Class 9 .docxvaibhavrinwa19
Acetabularia acetabulum is a single-celled green alga that in its vegetative state is morphologically differentiated into a basal rhizoid and an axially elongated stalk, which bears whorls of branching hairs. The single diploid nucleus resides in the rhizoid.
Welcome to TechSoup New Member Orientation and Q&A (May 2024).pdfTechSoup
In this webinar you will learn how your organization can access TechSoup's wide variety of product discount and donation programs. From hardware to software, we'll give you a tour of the tools available to help your nonprofit with productivity, collaboration, financial management, donor tracking, security, and more.
Macroeconomics- Movie Location
This will be used as part of your Personal Professional Portfolio once graded.
Objective:
Prepare a presentation or a paper using research, basic comparative analysis, data organization and application of economic information. You will make an informed assessment of an economic climate outside of the United States to accomplish an entertainment industry objective.
Embracing GenAI - A Strategic ImperativePeter Windle
Artificial Intelligence (AI) technologies such as Generative AI, Image Generators and Large Language Models have had a dramatic impact on teaching, learning and assessment over the past 18 months. The most immediate threat AI posed was to Academic Integrity with Higher Education Institutes (HEIs) focusing their efforts on combating the use of GenAI in assessment. Guidelines were developed for staff and students, policies put in place too. Innovative educators have forged paths in the use of Generative AI for teaching, learning and assessments leading to pockets of transformation springing up across HEIs, often with little or no top-down guidance, support or direction.
This Gasta posits a strategic approach to integrating AI into HEIs to prepare staff, students and the curriculum for an evolving world and workplace. We will highlight the advantages of working with these technologies beyond the realm of teaching, learning and assessment by considering prompt engineering skills, industry impact, curriculum changes, and the need for staff upskilling. In contrast, not engaging strategically with Generative AI poses risks, including falling behind peers, missed opportunities and failing to ensure our graduates remain employable. The rapid evolution of AI technologies necessitates a proactive and strategic approach if we are to remain relevant.
Honest Reviews of Tim Han LMA Course Program.pptxtimhan337
Personal development courses are widely available today, with each one promising life-changing outcomes. Tim Han’s Life Mastery Achievers (LMA) Course has drawn a lot of interest. In addition to offering my frank assessment of Success Insider’s LMA Course, this piece examines the course’s effects via a variety of Tim Han LMA course reviews and Success Insider comments.
2. Journal of Economics Studies and Research
When the financial crises occurred in 1997,
rupiah depreciated and continued to slide
and exceeded the upper limit of the
intervention band. Bank Indonesia decided
to float the rupiah on August 14, 1997.
Indonesia was the worst sufferer in the
Asian crisis. The nominal exchange rate
jumped from Rp2400 per US dollar to
almost Rp17000 per US dollar in mid 1998.
This paper attempts to analyze and test the
monetary approach and the overshooting
hypothesis in Indonesia. It emphasizes the
effect of financial liberalization to the
exchange rate of Indonesia in the period of
before and after the economic crisis. The
model of exchange rate determination is
expressed as a function of the relative
money supply, relative income level, the
nominal interest differential and the
expected long-run inflation differential. We
use the ordinary least square (OLS) method
in the analysis and applying the Chow test
in order to explore the stability of rupiah
before and after the economic crisis.
Literature Review
As the fixed exchange rate system had
terminated, many of the literatures began
to explain the exchange rate changes.
These literatures are laid on monetary or
asset view. The older theories of exchange
rate are focused more on trade of account
of the balance of payments, while new
theories; that are called “asset view,"
focused on a stock approach.
Frankel (1979) suggests that there are two
very different approaches in new theories.
The first approach might be called the
Chicago theory. It assumes that prices are
perfectly flexible. If there is a change in
nominal interest rate, it will reflect changes
in the expected inflation rate. When the
domestic interest rate rises relative to the
foreign interest rate, there will be a
decrease in home currency through
inflation and depreciation. So there will be
a positive relationship between the
exchange rate and the nominal interest rate
differential.
The second approach might be called the
Keynesian theory. It assumes prices are
sticky, at least in the short run. If there is a
change in the nominal interest rate, it will
reflect changes in the tightness of
monetary policy. When the domestic
interest rate rises relative to the foreign
rate, it will attract a capital inflow, which
causes the home currency to appreciate. So
there will be a negative relationship
between exchange rate and the nominal
interest differential.
The monetary approach to exchange rate
determination focuses on the money
market. The interaction between money
demand and money supply results in an
equilibrium exchange rate. Thus, the
exchange rate is seen as the equilibrium
price between two stocks of money.
In the monetary model, there are some
assumptions applied. Firstly, the money
supply is assumed to be stable and
exogenous. Secondly, assets are perfectly
substitutable; therefore, UIP (Uncovered
Interest Parity) holds continuously.
Thirdly, the demand for money is a stable
function of fundamental variables such as
income and interest rate. Fourthly, income
is assumed to be at its full-employment
level. Finally, PPP is assumed to hold
continuously.
The exchange rate of a monetary model is
determined by relative money demands
and money supplies. If domestic income
increases fairly to foreign income, then the
demand of money for domestic will
increase relatively to the supply.
Consequently, this causes the exchange
rate appreciates. By contrast, an increase in
the domestic money supply causes to
augment in the exchange rate. The excess
supply of money results in depreciating the
exchange rate respectively. Similarly, if
expected domestic inflation rises about the
expected in the foreign country, then the
demand for money falls and the exchange
rate will depreciate.
Dornbusch (1976) introduced his sticky-
price monetary model, which contained an
overshooting hypothesis. The main feature
of his model is that since prices are sticky
in the short-run, an increase in the money
supply will result in lower interest rate and
3. Journal of Economics Studies and Research
thus capital outflow, will cause currency
depreciation. In the short run, the currency
will overshoot itself. However, over time,
commodity prices will rise and result in a
decrease in real money supply and higher
interest rate. In the end, the currency will
appreciate.
The empirical researches about the
exchange rate determinants are varied. The
works of Frankel (1979), Driskill (1981),
and Papel (1998) provide the overshooting
model, while Backus (1981) and Flood and
Taylor (1996) do not. Hairault et al. (2004)
finds that an expansionary monetary policy
implies an increase in interest rate and a
depreciation of the exchange rate.
Obstfeld and Rogoff (2000) have recently
underlined the difficulty in estimating the
exchange rate volatility. Any models are
underlying fundamentals such as interest
rates, outputs and money supplies but no
model seems to be very good at explaining
exchange rates even ex-post.
Model
The theory of monetary approach begins
with two fundamental assumptions. The
first is the interest rate parity. The market
is efficient which bonds of different
countries are substitutable.
d= r – r* (1)
Where r is defined as the log of one plus the
domestic rate of interest and r* is defined
as the log of one plus the foreign rate of
interest. If d is considered to be the
forward discount, defined as the log of the
forward rate minus the log of the current
spot rate, subsequently equation (1) is a
statement of covered (or closed) interest
parity. However, d will be defined as the
expected rate of depreciation; then
equation (1) represents the stronger
condition of uncovered interest rate parity.
The second is that the expected rate of
depreciation is a function of the gap
between the current spot and an
equilibrium rate, and of the expected long-
run inflation differential between the
domestic and foreign countries:
d = - (e - e ) + - * (2)
Where e is the log of the spot rate and
and * are the expected inflation home and
foreign country. The log of the equilibrium
exchange rate e is defined to increase at
the rate of - *. Equation (2) says that in
the short run the exchange rate is expected
to return to its equilibrium value at a rate
which is proportional to the current gap,
and in the long run when e = e , it is
expected to change at the long-run rate -
*. The rational value of will be seen to be
closely to the speed of adjustment in the
good market.
Combining equation (1) and (2) gives:
e e
1
[(r ) (r * *)] (3)
The equation in the bracket shows the real
interest rate differential. When a tight
monetary policy in one country causes the
nominal interest differential to rise above
its long-run level, an incipient capital
inflow causes the value of the currency to
rise proportionally above its equilibrium
level.
Assuming that in the long run, purchasing
power parity holds:
e p p * (4)
4. Journal of Economics Studies and Research
Where p and p* are defined as the logs of
the equilibrium price level at home and
foreign country.
Assume that the function of money demand
equation:
m = p + y - r (5)
Where m, p and y are defined as the logs of
the domestic money demand, price level
and output. Assume also money demand
equals to the money supply. A similar
equation holds abroad, and the different
between the two equations for home and
foreign are:
m – m* = p – p* + (y-y*) - (r-r*) (6)
Considering that in the long run,
e e, r r*, * , we get
e p p * (7)
e m m * (y y*) (r r*) ( *) (8)
This equation illustrates the exchange rate
of monetary theory is determined by the
relative supply of and demand for two
currencies. The equation (8) shows that
exchange rate will increase if rising in the
domestic money supply, falling in income
and increasing in inflation.
With Dornbusch-Frankel sticky-price
monetary model and modified money
demand function, this paper specifies the
fundamentals for nominal exchange rate
determination model:
e (m m*) (y y*) (r r*) ( *) (9)
where , , 0; and 0; (*) After that, this paper implements a co-
denotes a variable of the foreign country, s
is the logarithm of the spot exchange rate
(rupiah per US$), m is the logarithm of the
money supply (M2), y is the logarithm of
real income, r is the short-term interest
rate, rate, is the expected inflation rate,
and is the disturbance term. Indeed,
monetarist would predict the estimate of
= 1, while in overshooting hypothesis, > 1.
Methodology
This paper uses the ordinary least square
method in order to see the factors that
influence the exchange rate of Indonesia.
Some tests have been set up to give the
best estimation. Before estimating the
regression, the data will be tested to make
sure that the data is valid and reliable, by
using such as the normality test, linearity
test, and stationarity.
integration technique to detect whether a
stable long-run relationship between
exchange rates and fundamental variables
exists. Co-integration methodology allows
researchers to test for the presence of
equilibrium relationships between
economic variables.
Prior to testing for co-integration, we need
to examine the time-series properties of
the variables. They should be integrated of
the same order to be co-integrated. In other
words, variables should be stationary after
differencing each time series the equivalent
number of times. Therefore, at the first
step, we develop unit root test to find the
non-stationary level.
5. Journal of Economics Studies and Research
Unit Root Test
Ganger and Newbold (1974) suggested that
in the presence of non-stationary variables,
there might be a spurious regression. A
spurious regression has a high R2 and t-
statistics that appear to be significant, but
the results are without any economic
meaning.
The time series of m, y, r, and are in fact
non-stationary time series, that is
generated by random process and can be
written as follow:
Zt Zt 1 t (10)
Where t is the stochastic error term that
follows the classical assumptions, which
means, it has zero mean, constant variance
and is non-auto correlated (such an error
term is also known as the white-noise error
term) and Z is the time series. Since we
need to use the stationary time series for
the next co-integration test, and we also
need to solve this unit root problem,
therefore, we will run the regression of unit
root test based on the following equation:
Zt a bZt 1 c Zt 1 t (11)
Where we add the lagged difference terms
of dependent variable Z to the right-hand
side of equation (2). This augmented
specification is then used to test:
Ho: b= 0 H1: b < 0
Therefore, both the Augmented Dickey-
Fuller (ADF) and Phillips-Perron (PP)
statistics are used to test the unit root as
the null hypothesis.
Co-integration Test
Engle and Granger suggested that co-
integration refer to variables that are
integrated of the same order. If two
variables are integrated of different orders,
they cannot be co-integrated.
Under the unit root test, the results show
that the variables of exchange rate, money
supply, output, interest rate and inflation
are stationary at the first difference [I(1)].
Continuously, all the variables will be
tested in co-integration test, by using the
Johansen test statistics, imply that if
exchange rate and macroeconomic
fundamental are co-integrated, so there is a
long term equilibrium relationship
between these variables.
At the end of the analysis, we use Chow
Breakpoint Test in order to check the
stability of rupiah after government
implemented the free floating exchange
rate in the third quarter of 1998.
The Data Set and Test Results
The data used in this paper aimed to test
the relationship between the exchange rate
of rupiah per U.S. dollar and the Indonesia
and U.S. fundamental macroeconomic
variables. The sample of this research is
quarterly data taken from International
Financial Statistics from 1997 until 2004.
The study employed the quarterly market
exchange rate to measure the exchange
rate. To measure income, we used the
three-monthly Gross Domestic Product.
The quarterly M2 was used to measure
money supply. Then the three-month
deposit rate was used to compute the
interest rate variable. Last not but least, to
measure the CPI variable was a quarterly
consumer price index. All of data is
expressed in logarithm except the interest
rate.
Stationarity Test
The estimated regression will be more
precisely if using stationary data. In order
to check the stationary data, this paper
uses the unit root test.
6. Journal of Economics Studies and Research
Table 1: Augmented Dickey-Fuller (ADF) and Phillip-Perron (PP) Statistics for Exchange
Rate and Macroeconomic Fundamental
Indonesia Case: 1997 – 2004
Level 1st difference
Var. ADF PP ADF PP
k=1 k=1 k=3 k=1
e -4.4634* -3.1982* -4.1555* -3.8044*
k=1 k=1 k=3 k=1
y -2.6127 -1.7949 -3.2460* -4.4573*
k=1 k=1 k=1 k=1
m -3.4703* -3.4130* -2.1976** -3.8066*
k=1 k=3 k=2 k=2
R -2.5838 -1.7612 -2.9427** -2.8500**
k=2 k=3 k=2 k=1
-3.3422* -2.4152 -5.6122* -5.1864*
Note: The ADF and PP statistics were generated by model with constant and trend. k is the lag length and
was determined by Akaike info criterion and Schwarz criterion for the ADF test. The PP test use the automatic lag
length that suggested by Newey-West. All variables were tested in log form.
* Denote rejection of the null at 5% level
** Denote rejection of the null at 10%level
Table 1 presents the results of both unit
root tests for the exchange rate of rupiah
per US dollar and measure of fundamental
macroeconomic variables for Indonesia
and United States in levels and first
difference. The ADF test fails to reject the
null hypothesis at the 5% level for some
variables such as output (y) and interest
rate (r). Similarly, the PP test also fails to
reject the null hypothesis for the same
variables.
However, the ADF and PP test rejected the
null hypothesis for all variables in the first
difference at 5% level, except the variable
of interest rate (r), which is at 10% level.
Since all variables are stationary at first
difference, therefore, it is an I(1) stochastic
process. The finding implies that it is
reasonable to proceed with test for co-
integrating relationship between
combinations of these series.
Estimated Regression
To predict the factors influencing exchange
rate determination of Indonesia, then the
regression is built using OLS method. The
result using the data 1997.3 until 2004.1 is
as follows:
e 0.1214y
(0.845)
2.443m*
(6.338)
0.0001r
(-0.002)
1.2692i **
(2.028)
R2 = 0.748 F = 16.366 DW = 2.136
* Denote rejection of the null at 5% level
** Denote rejection of the null at 10%level
The data of variable y, m, r and i are
domestic minus foreign data. The result
shows that the signs of variables are the
same as the hypothesis, except output. The
sign of this variable should be negative;
however, this data is insignificant. The
7. Journal of Economics Studies and Research
other variable that is insignificant is
interest rate, but it has the right sign. The
implication of this finding is the interest
rate is not a proper instrument in order to
influence the exchange rate. When the
central bank of Indonesia increases the
interest rate will only make the exchange
rate appreciate a little bit, and it is
insignificant.
Money supply and price are significant in
influencing the exchange rate of Indonesia.
The increase of money supply and interest
rate makes the exchange rate depreciate.
An increase 1.0 percent of the money
supply in Indonesia will depreciate
between rupiah to 2.4 percent. This means
rupiah is very sensitive to the money
supply. The implication of this finding is
the central bank has to control the
exchange rate in order to stabilize the
rupiah.
The results reveal that the elasticity
obtained for relative money supply m is
greater than unity (2.443). It indicates that
one-percent increase in Indonesia’s
relative money supply will cause a long-run
depreciation of the rupiah by 2.443%, a
result consistent with overshooting
hypothesis.
Price is also significant influencing the
exchange rate. Indonesia’s inflation in 1998
has been worsening the exchange rate. An
increase 1.0 percent of inflation will
stimulate depreciation of rupiah about 1.2
percent.
The Structural Change of Indonesia
Currency
When involving time-series data, it might
trigger the structural change. If the
structural change happens, the values of
the parameters of the model do not remain
the same through the period due to
external forces. The crisis hits Indonesia
may also cause the structural change of
Indonesia’s exchange rate. This paper uses
Chow Test in order to see the stability of
Rupiah after government changed the
exchange rate system from the managed
floating exchange rate to free floating
exchange rate in 1998. The result of Chow
test is as follows:
Table 2: The Result of Chow Test
F-statistic 3.677052 Probability 0.022186
Log likelihood ratio 15.47917 Probability 0.003804
The Chow test result shows that F values in
the estimated model does exceed the
critical F value at =5%. We can also check
to its p value which is lower than level of
significant, and that means there is a
structural change of rupiah before and
after Indonesia choosing the free floating
exchange rate system. The implication of
this finding is rupiah is instable before and
after economic crisis.
Co-Integration
This paper implements a co-integration
technique to detect whether a stable long-
run relationship between exchange rates
and fundamental variables exists. Co-
integration methodology allows
researchers to test for the presence of
equilibrium relationships between
economic variables.
8. Journal of Economics Studies and Research
Table 3: Co-Integration Results (With a Linear Trend)
Null r Alternative r Trace
Statistic
95 % Critical
Value
Max Eigen
Statistic
95% Critical
Value
0 1 151.24* 59.46 50.52* 30.04
1 2 100.72* 39.89 45.38* 23.8
2 3 55.35* 24.31 41.75* 17.89
3 4 13.60* 12.53 9.21 11.44
4 5 4.38* 3.84 4.38* 3.84
Where r is the number of co-integration vectors
* Denote rejection of the null at the 5% level with critical values from Oswald-Lenum (1992).
The parameter estimates of the co-
integrating model are reported in Table 2.
The Johansen test rejects the null
hypothesis at 5% which proves the
existence of co-integrating relationship
among exchange rate, output, money,
interest rate and inflation. Therefore, this
result indicates five co-integrating
equations at 5% significant level using
Trace Statistic. However, based on Max
Eigen Statistic there are three co-
integrating equations.
Conclusion
This paper examines the nature of linkages
between exchange rate and
macroeconomic fundamentals. It also
attempts to find out whether rupiah is
stable or not after financial liberalization in
1998 when the government implemented
the free floating exchange rate system.
We conduct several econometrics tests in
order to establish the appropriate
estimated regression. We also test the
stationarity of each time series in order to
estimate the co-integrating relationship in
the long run and short run. The findings
have identified that all time series are
stationary at the first difference in the
Augmented Dickey-Fuller and Phillip-
Perron test. Consequently, the Johansen co-
integrating test shows that the exchange
rate and macroeconomic fundamentals are
co-integrated in the long run. The latter, we
use Chow test to prove that rupiah is
instable after the financial liberalization.
The finding shows that there is a structural
change in rupiah.
Overall, the paper’s finding suggests that
money and interest rate influence exchange
rate significant either in short-run or long-
run. Therefore, the monetary institution of
Indonesia should be aware of these two
variables in order to stabilize the exchange
rate, moreover, the economic performance.
The elasticity obtained for relative money
supply m is greater than unity indicating
that this result consistent with
overshooting hypothesis.
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