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Exchange Rate Policy and Foreign Exchange Reserves Management in Indonesia in the Context of East Asian Monetary Regionalism

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Author Info

  • Reza Siregar

    ()
    (School of Economics, University of Adelaide, Australia)

  • Ramkishen Rajan

    ()
    (School of Economics, University of Adelaide, Australia)

Abstract

The first part of this paper examines the behaviour of rupiah over the last seven years (1996 - 2002) to ascertain whether in fact there is specific evidence of a return to de facto US dollar peg in Indonesia. To preview the main conclusion, we find evidence to suggest that this has been the case, hence justifying the need for accumulation of reserves by the Indonesian authorities. The next question that arises naturally from this is whether there is any way in which the liquidity yield from holding reserves may be generated without the need for Indonesia to continue to accumulate them. This is where a regional reserve pooling arrangement becomes relevant. But how might one judge the potential size of benefits of reserve pooling? This is the focus of the second part of the paper.

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File URL: http://www.adelaide.edu.au/cies/papers/0302.pdf
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Bibliographic Info

Paper provided by University of Adelaide, Centre for International Economic Studies in its series Centre for International Economic Studies Working Papers with number 2003-02.

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Length: 30 pages
Date of creation: Mar 2003
Date of revision:
Handle: RePEc:adl:cieswp:2003-02

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Related research

Keywords: Exchange Rate; Indonesia Rupiah; Reserves; US dollar; Volatility;

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Cited by:
  1. Tony Cavoli & Ramkishen Rajan, 2003. "Designing Appropriate Exchange Rate Regimes for East Asia: Inflation Targeting and Monetary Policy Rules," Centre for International Economic Studies Working Papers 2003-09, University of Adelaide, Centre for International Economic Studies.

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