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The Purchasing Power Parity Puzzle in Indonesia: Insights from ESTAR Model

Author

Listed:
  • K.S. Liew

    (Lecturer, Departement of Economics, Faculty of Economics and Management, Putra Malaysia University, Malaysia)

  • A.Z. Baharumshah

    (Lecturer, Departement of Economics, Faculty of Economics and Management, Putra Malaysia University, Malaysia)

  • K.P. Lim

    (Lecturer, Labuhan School of International Business and Finance, Universiti Malaysia Sabah)

Abstract

Selama beberapa tahun terlihat adanya lonjakan penelitian empiris mengenai validitas dari Purchasing Power Parity (PPP) di dalam dunia nyata. Meskipun demikian, beberapa hasil studi empiris sebelumnya menghasilkan laporan yang mixed, termasuk temuan empiris di Indonesia, yang memunculkan perdebatan diantara para pembuat kebijakan mengenai kegunaan dari temuan empiris. Salah satu penjelasan untuk puzzle dalam temuan empiris pada hipotesis PPP adalah studi-studi sebelumnya umumnya membuat asumsi implisit bahwa perilaku exchange rate adalah pada dasarnya linear. Dengan bukti-bukti yang banyak yang mendukung bahwa non-linearity merupakan gambaran nyata mengenai data exchange rate, seseorang tidak bisa lagi menganggap bahwa pergerakan exchange rate adalah linearly dependent. Paper ini secara empiris menginvestigasi dynamics of adjustment process dari exchange rate Indonesia dari tingkat equilibrium jangka panjang, seperti yang disarankan oleh hipotesis PPP. Untuk melengkapinya, diestimasi standard linearity test statistics seperti yang disarankan Lukhonen, Saikkonen, dan Terasvirta (1998), yang memiliki power dalam mengatasi Exponential Smooth Transition Autoregressive (ESTAR) model. Dengan menggunakan data series quarterly, hasilnya memperlihatkan bahwa bilateral Rupiah-USD (Indonesia Rupiah (IDR)/US Dollar (USD)) mengikuti nonlinearly PPP equilibrium level. Hal lainnya yang menarik dari studi ini adalah hubungan antara adjustment process dan Krisis Finansial di Asia saat ini. Hasilnya menunjukkan bahwa IDR/USD ditandai dengan low speed of adjustment dan hal inilah yang menerangkan kejatuhannya yang luar biasa selama krisis 1997.

Suggested Citation

  • K.S. Liew & A.Z. Baharumshah & K.P. Lim, 2003. "The Purchasing Power Parity Puzzle in Indonesia: Insights from ESTAR Model," Economics and Finance in Indonesia, Faculty of Economics and Business, University of Indonesia, vol. 51, pages 253-269, September.
    • Handle: RePEc:lpe:efijnl:200309
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    References listed on IDEAS

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