Determinant of exchange rate with hybrid model: Empirical evidence from Indonesia

Tony Seno Aji; Munawar Ismail; Ghozali Maski; Dwi Budi Santoso

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Determinant of exchange rate with hybrid model: Empirical evidence from Indonesia

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Tony Seno Aji, Munawar Ismail, Ghozali Maski, Dwi Budi Santoso

2016 Journal of Applied Economic Sciences Vol. 11 Issue 6 Article Cited by 0 SDG 8SDG 10

Abstract

The purpose of this study is to examine the determinants of the exchange rate in Indonesia by using a hybrid model which is a combination of macroeconomic model with a model of the microstructure. Furthermore, hybrid models are estimated using an error correction model of Domowitz El-Badawi. The results show that five macro variables (money supply, interest rates, inflation, output growth, and capital flow) and a variable microstructures (inventory) has a significant influence on the determination of the exchange rate. © 2016, ASERS Publishing House. All rights reserved.

Affiliations

Brawijaya University, Faculty of Economics, Surabaya State University, Indonesia; Faculty of Economics and Business, Brawijaya University, Indonesia

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