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The Role of Currency Hedging on Firm Performance: A Panel Data Evidence in Indonesia

Author

Listed:
  • Fiskara Indawan

    (Bank Indonesia)

  • Sri Fitriani

    (Bank Indonesia)

  • Indriani Karlina

    (Bank Indonesia)

  • Melva Viva Grace

    (Bank Indonesia)

Abstract

This paper analyzes the macro prudential policy by the central bank to maintain the financial�system stability. Using panel data of the government banks, foreign, private, joint venture, and regional�development banks during 2004- 2012, we employ Vector Autoregressive Exogenous (VARX) and event�analysis method and find that the level of exchange rate volatility decrease after the implementation of�the one month holding period, six-month holding period and net open position policies. However, for�the nominal exchange rate, these policies are not effective. In aggregate the reserve requirement plus�loan to deposit ratio policy is effective to raise the bank credit allocation. Furthermore, the impact of the�primary reserve policy is very limited to lower the liquidity of the economy; while at the same time the�flow of foreign capital comes into very heavy.

Suggested Citation

  • Fiskara Indawan & Sri Fitriani & Indriani Karlina & Melva Viva Grace, 2015. "The Role of Currency Hedging on Firm Performance: A Panel Data Evidence in Indonesia," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 17(3), pages 1-20, January.
  • Handle: RePEc:idn:journl:v:17:y:2015:i:3:p:1-20
    DOI: https://doi.org/10.21098/bemp.v17i3.39
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    Citations

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    Cited by:

    1. Hari Venkatesh & Gourishankar S Hiremath, 2020. "Currency Mismatches In Emerging Market Economies: Is Winter Coming?," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 23(1), pages 25-54.

    More about this item

    Keywords

    Hedging; derivative market; foreign liability;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

    Statistics

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