DOMESTIC MACROECONOMIC FUNDAMENTALS, GLOBAL COMMODITY PRICE SHOCKS, AND RUPIAH EXCHANGE RATE FLUCTUATIONS

Putri Dwi Nurwulandari; Aminudin  Ma’ruf

doi:10.26533/eksis.v20i2.1591

Putri Dwi Nurwulandari State University of Surabaya
Aminudin Ma’ruf State University of Surabaya

DOI: https://doi.org/10.26533/eksis.v20i2.1591

Keywords: Exchange Rate, Rupiah, Domestic Macroeconomic Fundamentals, Global

Abstract

This study investigates the determinants of the rupiah exchange rate against the US dollar over the 2010–2024 period, focusing on inflation, money supply, foreign exchange reserves, trade balance, global oil prices, global gold prices, and a COVID-19 dummy variable. The analysis employs a Vector Error Correction Model (VECM), complemented by the Impulse Response Function (IRF) and Forecast Error Variance Decomposition (FEVD). The short-run results indicate that domestic macroeconomic variables, global commodity prices, and the COVID-19 dummy do not have a statistically significant effect on the exchange rate, suggesting that short-term movements are driven primarily by market adjustment and policy stabilization mechanisms. However, the error correction term is negative and statistically significant, and the lagged exchange rate is also significant, indicating that deviations from long-run equilibrium are gradually corrected over time. In the long run, inflation and money supply exert a negative effect on the exchange rate, whereas the trade balance and global oil prices have a positive effect. By contrast, foreign exchange reserves and global gold prices are not statistically significant, implying that these variables play a stabilizing rather than a determining role in exchange rate movements. The IRF results show that the exchange rate responds gradually and converges following macroeconomic shocks, while the FEVD results indicate that long-run exchange rate fluctuations are influenced mainly by trade balance and oil price shocks, although their relative contributions remain limited.

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