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Financial Dollarisation Hysteresis: The Case of Indonesia

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  • Rahmanda Muhammad Thaariq
  • Heni Wahyuni

Abstract

This paper provides a determinant analysis of financial dollarisation hysteresis in Indonesia during 2007–2016 by employing the autoregressive distributed‐lag estimation method. Placing emphasis on the return aspect, this paper indicates that financial dollarisation in Indonesia has been shaped by inflation, the exchange rate, inflation volatility, the exchange rate's volatility and the spread. Given the macroeconomic conditions, ensuring credible inflation targeting, making the rupiah more attractive and building a prudent standard would all help Indonesia to escape from its financial dollarisation hysteresis.

Suggested Citation

  • Rahmanda Muhammad Thaariq & Heni Wahyuni, 2019. "Financial Dollarisation Hysteresis: The Case of Indonesia," Economic Papers, The Economic Society of Australia, vol. 38(4), pages 286-298, December.
    • Handle: RePEc:bla:econpa:v:38:y:2019:i:4:p:286-298
    DOI: 10.1111/1759-3441.12268
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