Open AccessStudy of Exchange Rate Volatility and Its Effect on Indonesian Economic Indicators With Potential Exchange Rate Crisis
Author(s) -
Adin Nugroho,
Nasrudin Nasrudin
Publication year - 2022
Publication title -
proceedings of international conference on data science and official statistics
Language(s) - English
Resource type - Journals
ISSN - 2809-9842
DOI - 10.34123/icdsos.v2021i1.108
Subject(s) - volatility (finance) , economics , exchange rate , autoregressive integrated moving average , econometrics , heteroscedasticity , forward volatility , indonesian , autoregressive conditional heteroskedasticity , volatility swap , autoregressive model , monetary economics , implied volatility , time series , statistics , mathematics , linguistics , philosophy
Exchange rate volatility occurred when exchange rate movement was wildly fluctuating which could depict uncertainty. Since Indonesia used an open economy, exchange rate fluctuation became important to be maintained due to crisis potential. This research was conducted to analyze the effect or impact of exchange rate volatility on the Indonesian economy in general and few related case using time series analysis. ARIMA (Autoregressive Integrated Moving Average) and EGARCH (Exponential Generalized Autoregressive Conditional Heteroscedasticity) were used for measuring the volatility in the period between 1997-2021. Then, regressions were applied to analyze the impact of exchange rate volatility on few macroeconomic indicators. The result shows that exchange rate volatility yielded a significant negative effect on GDP Growth rate, export, and import. Logistic regression was used to analyze the factors that were affecting the crisis potential. The result showed only a negative GDP growth rate and high volatility that gave more risk which could lead to crisis. Therefore, it is important to keep exchange rate volatility stable.