Open AccessFOREIGN EXCHANGE MARKETS: AN ERROR CORRECTION MODEL ANALYSIS
Author(s) -
I.B.M. Wiyasha
Publication year - 2009
Publication title -
manajemen dan bisnis/manajemen dan bisnis
Language(s) - English
Resource type - Journals
eISSN - 2477-1783
pISSN - 1412-3789
DOI - 10.24123/jmb.v6i2.110
Subject(s) - foreign exchange , exchange rate , error correction model , economics , stability (learning theory) , econometrics , foreign exchange market , monetary economics , computer science , cointegration , machine learning
This study aims at investigating the behavior of foreign exchange rate markets in Indonesia using 1350 daily observations. Another objective of this study is to examine the structural stability due to Bali bombing chapter I and II. The markets being investigated are USD, AUD, SGD, and YEN; all relative to rupiah. The ECM is applied to investigate the behavior of the markets aforementioned. The findings of this study are that the markets are co integrated and there is a long term equilibrium relationship among them. Using the Chow test, this study finds that there is no structural stability in the markets after Bali bombing chapter I and II.