Exchange Rate Movements in Indonesia: Determinants, Effects, and Policy Challenges - Bank Sentral Republik Indonesia
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October 26, 2020

In this paper we provide an overview analysis of the role of the exchange rate in the Indonesian economy. In particular, we have explored three main issues. The first is how the exchange rate is determined in Indonesia, the second is why the exchange rate matters to the Indonesian economy, and the third concerns the policy challenges presented by exchange rate fluctuations in the post-crisis period. We find some evidence to suggest that non-market factors continue to play a role in influencing the exchange rate, although many of the vulnerabilities typically associated with rupiah movements appear to have declined.

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