A Structural VAR Model of Exchange Rate Market Pressure: The Case of Indonesia

Lestano .

= http://dx.doi.org/10.20473/jeba.V20I12010.4276
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Abstract


This paper examines how exchange rate market pressure (EMP) response to its
determinant shocks for the case of Indonesia using quarterly data for the period 1981:Q1–
2004:Q4. We translate theoretical model of exchange rate market pressure into empirical
model and test the model by means of a Structural VAR methodology. We find some
evidence of a positive relationship between EMP and domestic credit. However, output
growth also plays a role in the determination of EMP. In addition, there is evidence that
output growth and money multiplier affected EMP negatively.
Keywords : exchange rate market pressure, structural VAR, Indonesia
JEL codes: C32, F31, F41


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