The Analysis of the Effects of Interest Rates, Money Supply, Inflation, and World CPO Prices on the Indonesian Rupiah Exchange Rate during the Period of 2015–2024.

Abstract

The movement of the Indonesian rupiah exchange rate against the United States dollar during the 2015–2024 period has affected national macroeconomic stability. This condition has contributed to a decline in public purchasing power, economic uncertainty, and export competitiveness. This study aims to analyze the effect of interest rates, money supply, inflation, and world CPO prices on the rupiah exchange rate in Indonesia during the 2015–2024 period. The study uses monthly time series data obtained from Bank Indonesia, the Central Statistics Agency (BPS), and the World Bank, analyzed using the Error Correction Model (ECM) method with the assistance of E-Views 12 software. The results show that interest rates have a significant positive effect in the long run. The money supply has a significant positive effect on the exchange rate in both the long and short run. Inflation does not have a significant effect, while world CPO prices considering Indonesia accounts for approximately of global CPO production as the world’s largest producer have a significant negative effect during the study period, indicating their role in strengthening the exchange rate through increased foreign exchange earnings. The F-statistic results also indicate that all independent variables simultaneously have a significant effect on the exchange rate.

Keywords:  Exchange Rate, Interest Rate, Money Supply, Inflation, Global CPO Prices, Error Correction Model (ECM).