<abstract xmlns="http://www.w3.org/1999/xhtml"><p>This research aims to analyse the response of the Bank Indonesia (BI rate) to the Indonesian economic stability. The data analysis is stationarity test, model stability test, lag determination, Structural Vector Autoregression (SVAR), Impulse Response Function (IRF), and Variance Decomposition (VD). The research data is obtained from the publication provided by the Federal Reserve Data (FRED), the Bank Indonesia, and the Central Bureau of Statistics. The data used is since the third quarter of 2005 to the first quarter of 2017. The research results showed that the variable of the federal funds rate (FFR) significantly influences the exchange rate and the Consumer Price Index (CPI), but it does not significantly affect the BI rate, the amount of the money supply (M2), and Gross Domestic Product (GDP). The result of the IRF test showed that the BI rate, the amount of money supply, exchange rate (IDR/USD), GDP, and CPI positively and negatively respond the FFR change. The result of VD test indicated that the variation of the BI rate, the currency exchange rate, and CPI are mostly caused by the FFR variation.</p></abstract>

This research aims to analyse the response of the Bank Indonesia (BI rate) to the Indonesian economic stability. The data analysis is stationarity test, model stability test, lag determination, Structural Vector Autoregression (SVAR), Impulse Response Function (IRF), and Variance Decomposition (VD). The research data is obtained from the publication provided by the Federal Reserve Data (FRED), the Bank Indonesia, and the Central Bureau of Statistics. The data used is since the third quarter of 2005 to the first quarter of 2017. The research results showed that the variable of the federal funds rate (FFR) significantly influences the exchange rate and the Consumer Price Index (CPI), but it does not significantly affect the BI rate, the amount of the money supply (M2), and Gross Domestic Product (GDP). The result of the IRF test showed that the BI rate, the amount of money supply, exchange rate (IDR/USD), GDP, and CPI positively and negatively respond the FFR change. The result of VD test indicated that the variation of the BI rate, the currency exchange rate, and CPI are mostly caused by the FFR variation.

Interest Rate Volatility of the Federal Funds Rate: Response of the Bank Indonesia and its Impact on the Indonesian Economic Stability

Faculty of Economics and Islamic Business IAIN Tulungagung

Journal of Central Banking Theory and Practice

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

This research aims to analyse the response of the Bank Indonesia (BI rate) to the Indonesian economic stability. The data analysis is stationarity test, model...

Interest Rate Volatility of the Federal Funds Rate: Response of the Bank Indonesia and its Impact on the Indonesian Economic Stability

Published Online: Jan 28, 2020

Page range: 111 - 133

Received: Sep 10, 2018

Accepted: Oct 30, 2018

DOI: https://doi.org/10.2478/jcbtp-2020-0007

Keywords
Federal Funds Rate, BI Rate, Money Supply, Exchange Rate, Structural Vector Autoregression

© 2019 Imam Mukhlis et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Interest Rate Volatility of the Federal Funds Rate: Response of the Bank Indonesia and its Impact on the Indonesian Economic Stability

Published Online: Jan 28, 2020

Page range: 111 - 133

Received: Sep 10, 2018

Accepted: Oct 30, 2018

DOI: https://doi.org/10.2478/jcbtp-2020-0007

KeywordsFederal Funds Rate, BI Rate, Money Supply, Exchange Rate, Structural Vector Autoregression

© 2019 Imam Mukhlis et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Keywords
Federal Funds Rate, BI Rate, Money Supply, Exchange Rate, Structural Vector Autoregression