ANALYSIS OF EXCHANGE RATE PASS-THROUGH TO PRICE STABILITY IN INDONESIA 2010-2019

Annaba Maharani, Hery Sulistio Jati Nugroho Sriwiyanto, Faiza Husnayeni Nahar

Abstract


As an open country, the exchange rate affects Indonesia's macroeconomic stability, especially inflation. Extreme exchange rate depreciation can cause inflation to be high so it disrupts the ultimate goal of monetary policy, namely maintaining price stability. This study identifies the effect of the exchange rate on price stability and the transmission of the exchange rate to price stability. This study uses secondary data on the Nominal Effective Exchange Rate (NEER), Consumer Price Index (CPI), Output Gap, Import Prices, and Oil Prices. The method that will be used in this research is VECM which will look at impulse response and variance decomposition. The results of this study indicate that shock on the exchange rate affects price stability with direct pass-through between the exchange rate variable and the consumer price index.

Keyword: Price Stability; Exchange Rate Transmission; Exchange Rate Pass-Through


Full Text:

PDF
rticle

References


Bangun, W. (2003). Alat Kebijakan Moneter Di Indonesia. In Jurnal Manajemen Maranatha (Vol. 3, Issue 1). https://doi.org/10.28932/jmm.v3i1.112

Beirne, J., & Bijsterbosch, M. (2011). Exchange rate pass-through in central and eastern European EU Member States. Journal of Policy Modeling, 33(2), 241–254. https://doi.org/10.1016/j.jpolmod.2010.11.001

Billmeier, A., & Bonato, L. (2004). Exchange rate pass-through and monetary policy in Croatia. Journal of Comparative Economics, 32(3), 426–444. https://doi.org/10.1016/j.jce.2004.03.004

BIS. 2020. Bank for Intenational Settlements. [Online] Availables at: https://stats.bis.org/statx/srs/table/I1?c=&p=201905&m=B# [Accessed 2 Mei 2020].

BIS. 2020. Bank for Intenational Settlements. [Online] Availables at: https://stats.bis.org/statx/srs/table/I1?c=&p=201905&m=B# [Accessed 6 Mei 2020].

Choudhri, E. U., & Hakura, D. S. (2006). Exchange rate pass-through to domestic prices: Does the inflationary environment matter? Journal of International Money and Finance, 25(4), 614–639. https://doi.org/10.1016/j.jimonfin.2005.11.009

Devereux, M. B., Engel, C., & Storgaard, P. E. (2004). Endogenous exchange rate pass-through when nominal prices are set in advance. Journal of International Economics, 63(2), 263–291. https://doi.org/10.1016/S0022-1996(03)00074-6

Ghartey, E. E. (2019). Asymmetries in exchange rate pass-through and monetary policy principle: Some Caribbean empirical evidence. North American Journal of Economics and Finance, 47(February), 325–335. https://doi.org/10.1016/j.najef.2018.05.001

Gujarati, D. N., & Econometrics, B. (2004). As in the previous three editions, the primary objective of the fourth edition of. In New York. https://doi.org/10.1126/science.1186874

Junttila, J., & Korhonen, M. (2012). The role of inflation regime in the exchange rate pass-through to import prices. International Review of Economics and Finance, 24, 88–96. https://doi.org/10.1016/j.iref.2012.01.005

Kassi, D. F., Sun, G., Ding, N., Rathnayake, D. N., & Assamoi, G. R. (2019). Asymmetry in exchange rate pass-through to consumer prices: Evidence from emerging and developing Asian countries. Economic Analysis and Policy, 62, 357–372. https://doi.org/10.1016/j.eap.2018.09.013

Kemenkue, 2014. Badan Kebijakan Fiskal. [Online] Available at : https://fiskal.kemenkeu.go.id/dw-konten- view.asp?id=20150630111553269721458 [Accessed 21 5 2020].

López-Villavicencio, A., & Pourroy, M. (2019). Does inflation targeting always matter for the ERPT? A robust approach. Journal of Macroeconomics, 60(March), 360–377. https://doi.org/10.1016/j.jmacro.2019.04.004

Mankiw, N. G. (2007). Principles of Microeconomics (Fourth Edition). 481. McFarlane, Lavern (2002). Consumer Price Inflation And Exchange rate pass-

through In Jamaica . Research and Economic Programming Division Bank of

Jamaica.

Nasution, D., & Hendranata, A. (2014). Estimasi Output Gap Indonesia. Jakarta Oecd, 2020. Oecd. [Online] Available at :

https://data.oecd.org/conversion/exchange-rates.htm [Accesed 6 mei 2020]

Oecd, 2020. Oecd. [Online] Available at : https://data.oecd.org/price/inflation- cpi.htm [Accesed 4 mei 2020]

Shintani, M., Terada-Hagiwara, A., & Yabu, T. (2013). Exchange rate pass- through and inflation: A nonlinear time series analysis. Journal of International Money and Finance, 32(1), 512–527. https://doi.org/10.1016/j.jimonfin.2012.05.024

Suseno, & Simorangkir, I. (2004). Sistem dan Kebijakan Nilai Tukar. Pusat Pendidikan Dan Studi Kebanksentralan (PPSK) BI, 12(12), 61.

Syarifuddin, F. (2015). Konsep, Dinamika dan Respon Kebijakan Nilai Tukar Di Indonesia. Bank Indonesia, 24, 1–101.

Worldbank, 2020. World bank. [Online] Available at: https://data.worldbank.org/indicator/FP.CPI.TOTL.ZG?location=ID&view=c art [Accessed 4 mei 2020]

Yanamandra, V. (2015). Exchange rate changes and inflation in India: What is the extent of exchange rate pass-through to imports? Economic Analysis and Policy, 47, 57–68. https://doi.org/10.1016/j.eap.2015.07.004




DOI: https://doi.org/10.20961/aedc.v7i1.79420

Refbacks

  • There are currently no refbacks.


Copyright (c) 2023 Journal of Applied Economics in Developing Countries



Journal of Applied Economics in Developing Countries
Master of Economics and Development Studies, Faculty of Economics and Business
Universitas Sebelas Maret
Jl. Ir Sutami 36 A Surakarta, 57126 Indonesia
Telp: +62271-647481
Email: jurnalaedc@gmail.com