Analysis The Determination of The Stability of Exchange Rates In Indonesia

The exchange rate is the value of the currency of a country with the value of the currency of other countries, which used to make the international trade. This study aims to analyze the effect of BI Rate, money supply, inflation, foreign exchange tourism, exports and imports on the exchange rate in Indonesia. The analysis uses cointegration equation with Error Correction Model (ECM) method. This paper investigates the relationship between the dependent and independent variables in both the short term and long term. The estimation results show that in the short term, variables that affect the rupiah exchange rate on US $ in Indonesia are BI interest rate and exports. While in the long run, the independent variable effect on the exchange rate of the rupiah is the BI interest rates, money supply, and export also. Inflation, foreign exchange tourism, and import do not affect rupiah exchange rate either in short or long term. These results show that control the level of interest rates and the money supply as well as encouraging exports have a crucial role in controlling the exchange rate so that the economy will be in a stable condition.