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Real exchange rate targeting and inflation in Indonesia: theory and empirical evidence


  • Reza Yamora Siregar


Looking at the period of January 1987 to July 1995, this study shows that the monetary authority in Indonesia had actively intervened the foreign exchange market to ensure the stability of rupiah real exchange rate. Strong evidences of real exchange rate targeting were even more significant during the period of January 1990-February 1993. The study also shows that the real exchange rate targeting policy in Indonesia had been inflationary, particularly during the period of January 1990-July 1995. The last finding supports the results of early studies that showed exchange rate policy which targets a faster rate of depreciation of the domestic currency contributes to a higher inflation rate.

Suggested Citation

  • Reza Yamora Siregar, 1999. "Real exchange rate targeting and inflation in Indonesia: theory and empirical evidence," Applied Financial Economics, Taylor & Francis Journals, vol. 9(4), pages 329-336.
  • Handle: RePEc:taf:apfiec:v:9:y:1999:i:4:p:329-336 DOI: 10.1080/096031099332212

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    References listed on IDEAS

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    Cited by:

    1. Reza Siregar, 2011. "The Concepts of Equilibrium Exchange Rate: A Survey of Literature," Staff Papers, South East Asian Central Banks (SEACEN) Research and Training Centre, number sp81, January.
    2. Ramkishen S. Rajan & Reza Siregar & Iman Sugema, 2003. "Why was there a precrisis capital inflow boom in Southeast Asia?," Journal of International Development, John Wiley & Sons, Ltd., vol. 15(3), pages 265-283.
    3. Reza Siregar & Victor Pontines, 2005. "Incidences of Speculative Attacks on Rupiah During The Pre- and Post-1997 Financial Crisis," Centre for International Economic Studies Working Papers 2005-04, University of Adelaide, Centre for International Economic Studies.
    4. Uma Ramakrishnan & Athanasios Vamvakidis, 2002. "Forecasting Inflation in Indonesia," IMF Working Papers 02/111, International Monetary Fund.

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