Foreign Exchange Expectations in Indonesia: Regime Switching Chartists & Fundamentalists Approach
In this research, the eﬀect of central bank intervention within a heterogeneous expectations exchange rate model, is investigated. The empirical evidence is conducted by applying a Markov switching approach to daily USD/IDR exchange rate, intervention data of Bank Indonesia from 2006 to 2012. The results are supporting both chartists and fundamentalist regimes. It is shown that the two regimes are persistent. Meanwhile, Bank Indonesia’s foreign-exchange intervention has been able to drive the USD/IDR to its fundamentalist rule. However, Bank Indonesia efforts to exert a stabilizing eﬀect of foreign exchange interventions, the result are inconclusive.
Buletin Ekonomi Moneter dan Perbankan / Bulletin of Monetary Economics and Banking is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.