Abstract:
This research intends to analysis the influences of inflation and interest rate
to fluctuation of foreign currency exchange rate in Indonesia. According to the
Parity Theory, the foreign currency exchange rate could be influence by the
difference of inflation (PPP Theory) and interest rate (IRP Theor>). Therefore,
writer try to look at the influences of inflation (PPP) based of Power Parity (PPP
Theory) and interest rale based of Interest Rate Parily (IRP Theor>') to hard
currency exchange rate, like : USA, Poundsterling, CHF and Yen, specially after
moneter crisis in Indonesia.
Population on this research is foreign currency exchange rale hard currency
to Rupiali eveiy month for three years at 2001 - 2003. Independent variables on
this research are inflation (PPP) and interest rate (IRP). And the dependent variable
is foreign currency exchange rate it's self Data using aie foreign currency
exchange rale, unrisk interest rale and the inflation of Indonesia, America, England,
Swiss and Japanese.
According lo the R squared calculation result could find know the
contribution of the influence of inflation and interest rate to USD are :
is 42,3 %, to GBP only 2,7%, to CHF 37,2% and to JPY is 27,8%.
The influence of inflation is biger than interest rale for USD, GBP & CHF.
• USD = 42,3 %
• GBP = 2,7%
• CHF = 37,2% and
• JPY = 27,8%.
Fact, the influence of inflation (PPP) is higher than interest rate influence to
USD, CHF and JPY. And for JPY the influence of interest rale (IRP) is higher.
According to the F examination we can see that inflation and interest rate
influenc simultanly lo USD, CHF and JPY. But there is no influence lo GBP.
IRP and PPP factors are strong enough to influence the rupiah exchange
rale to yen. This is discribed that the different between domestic inflation to foreign
inflation and between domestic interest rate to foreign interest rale has a big part on
decided the rupiah exchange rate to yen. Generally, investment decided of rupiah
exchange rate to yen is better than investment decided of rupiali exchange rate to
dollar, poundsterling and sv^^issfranc. It is because both factors of IRP and PPP
really has a big part on decide the investment form which lo carr>' out.
