Time Series Studies On Indonesian Rupiah?Usd Rate 1995-2005

The exchange rate of the Indonesian rupiah to the U.S. dollar has experienced three regimes since 1967 fixed, managed float, and free float. From 1967 to1968, the rupiah was devalued eight times. The devaluations were part of an expenditure switching policy program and were considered the right policy to correct the misalignment of the rupiah. However, it became clear that such an approach would fail due to inflation. After 1986, the Indonesian authorities switched the exchange regime to a managed float program. This meant that the central bank of Indonesia would have to defend the rupiah from time to time. The program went smoothly at first, until the currency crisis in 1997. This thesis investigates the rupiah s behavior from 1995 through 2005. It investigates whether the efficient market hypothesis holds, how the rupiah behaved in the past, and how it will likely behave in the future.