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Should Indonesia adopt a basket currency regime?
Prasetyo A.D.a, Magdalena C.a, Charvia B.a, Kitri M.L.a
a Institut Teknologi Bandung, Bandung, 40132, Indonesia
[vc_row][vc_column][vc_row_inner][vc_column_inner][vc_separator css=”.vc_custom_1624529070653{padding-top: 30px !important;padding-bottom: 30px !important;}”][/vc_column_inner][/vc_row_inner][vc_row_inner layout=”boxed”][vc_column_inner width=”3/4″ css=”.vc_custom_1624695412187{border-right-width: 1px !important;border-right-color: #dddddd !important;border-right-style: solid !important;border-radius: 1px !important;}”][vc_empty_space][megatron_heading title=”Abstract” size=”size-sm” text_align=”text-left”][vc_column_text]© 2020 Inderscience Enterprises Ltd.. All rights reserved.Exchange rate regime is a system in which a country manages its currency about other currencies and the foreign exchange market. Currently, there are two major types of exchange rate regimes, i.e., free-float system and pegged system. Many countries, including Indonesia, adopted the free-float system since it is believed as the best regime for absorbing external economic shocks. However, some economists argued that a moderate exchange rate regime, such as currency basket system, is a better approach for achieving the government’s goals. The research aims to provide an arrangement for optimal basket weights of Indonesian currency basket to minimise GDP volatility as well as exchange rate volatility. We develop an optimisation model in the extension of Yoshino et al. (2017) by adding five currencies in the basket. We found that the weight currencies in the free-float regime would reflect the trade intensities of the respective countries. Further, the government should monitor the change of exchange rates of currencies in the foreign reserves and change the weight accordingly. In addition, we also found that, whether the government implementing basket currency regime or free-float regime, it will make no significant differential effect on GDP gap volatility.[/vc_column_text][vc_empty_space][vc_separator css=”.vc_custom_1624528584150{padding-top: 25px !important;padding-bottom: 25px !important;}”][vc_empty_space][megatron_heading title=”Author keywords” size=”size-sm” text_align=”text-left”][vc_column_text][/vc_column_text][vc_empty_space][vc_separator css=”.vc_custom_1624528584150{padding-top: 25px !important;padding-bottom: 25px !important;}”][vc_empty_space][megatron_heading title=”Indexed keywords” size=”size-sm” text_align=”text-left”][vc_column_text]Basket currency,Exchange rate gap,Exchange rate regime,Foreign reserve,GDP gap,Indonesia.[/vc_column_text][vc_empty_space][vc_separator css=”.vc_custom_1624528584150{padding-top: 25px !important;padding-bottom: 25px !important;}”][vc_empty_space][megatron_heading title=”Funding details” size=”size-sm” text_align=”text-left”][vc_column_text][/vc_column_text][vc_empty_space][vc_separator css=”.vc_custom_1624528584150{padding-top: 25px !important;padding-bottom: 25px !important;}”][vc_empty_space][megatron_heading title=”DOI” size=”size-sm” text_align=”text-left”][vc_column_text]https://doi.org/10.1504/AAJFA.2020.110490[/vc_column_text][/vc_column_inner][vc_column_inner width=”1/4″][vc_column_text]Widget Plumx[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row][vc_column][vc_separator css=”.vc_custom_1624528584150{padding-top: 25px !important;padding-bottom: 25px !important;}”][/vc_column][/vc_row]