Jurnal Keuangan dan Perbankan Universitas Merdeka Malang
Exchange Rate Volatility and Economic Growth: Managed Floating and Free-Floating Regime

Jurnal Keuangan dan Perbankan Universitas Merdeka Malang
Exchange Rate Volatility and Economic Growth: Managed Floating and Free-Floating Regime

Exchange Rate Volatility; Economic Growth; Exchange Rate Regime; Generalized Autoregressive Conditional Heteroskedasticity; Vector Autoregressive Model

Indonesia's economy has been in its worst period. At that time, economic growth was below zero percent. One of the reasons is the high volatility of exchange rates in 1997-1998 when the exchange rate regime was transferred from managed floating to free-floating. Now, the high volatility of the exchange rate is feared to have an impact on the economy, especially economic growth, because it is one of the main focuses of the government's current achievements. Therefore, this study aims to see whether volatility impacts Indonesia's economic growth, especially in two different exchange rate regimes, managed floating and
free-floating. This empirical research is based on quarterly data for 1994 - 2020, using the stimation method of Generalized Autoregressive Conditional Heteroskedasticity (GARCH) and Vector Autoregressive Model (VAR). The result shows that exchange rate volatility has a significant negative effect on economic growth, while the exchange rate
regime moderates the impact of exchange rate volatility on economic growth.

Felicia Grace Ratnasari Utomo, Siti Saadah

DOI: 10.26905/jkdp.v26i1.5878

Universitas Merdeka Malang

January 2022

Sri Wahyuni

ISSN: 2443-2687 (Online) ISSN: 1410-8089 (Print)

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Jurnal Keuangan dan Perbankan Universitas Merdeka Malang