ANALYSIS OF FACTORS AFFECTING RUPIAH EXCHANGE RATE TOWARD US DOLLAR IN FREE FLOATING EXCHANGE RATE SYSTEM

Hendry Wijaya, Arintoko Arintoko, Istiqomah Istiqomah

Abstract


The purpose of this study is to analyze the effect of inflation, the current account balance, and the interest rate on the exchange rate of the rupiah against the dollar after the application of the free floating exchange rate system. The data used in this study is the time series from 1997 semester 1 to 2018 semester 2. The analysis tool used is multiple linear regression with ordinary least square (OLS) model. The results of the analysis show that the current account and interest rates variables have a positive and significant effect on the rupiah exchange rate at a 5 percent significance level. The inflation variable has a negative and not significant effect on the rupiah exchange rate. The implication of this finding is that the government and Bank Indonesia must continue to monitor and control interest rates and increase exports so that the current account balance remains surplus.

 

Keywords: Exchange Rate, Inflation, Current Account, Interest Rate, floating Exchange Rate System


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