ABDULLAH, Fatan Zahid (2017) The Effect of Fed Fund Rate, Rupiah Exchange Rate, and Capital Outflow on BI Rate (in the Period of 2008-2016). Skripsi thesis, Universitas Jenderal Soedirman.

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Abstract

BI rate is one of the main policies of Bank Indonesia in maintaining and regulating the monetary sector in Indonesia. BI rate determination illustrated the direction of monetary policy and also illustrated the current condition of the Indonesian economy. One of the external factors that influenced the determination of BI rate is The Fed rate. Based on the several results , when there is an increase in The Fed rate, it will be followed by the increased in BI rate to minimize the Capital Outflow and the weakening of Rupiah exchange rate. However, in September 2015 until June 2016, the phenomenon that occured indicated that when the increased in The Fed rate responded with a decreased in BI rate. The purpose of this study is to find out the effect of changes in The Fed rate, Rupiah exchange rate, and Capital Outflow toward BI rate, and also to find out the mechanism of the transmission path from The Fed interest rate change to BI rate with Capital Outflow and Rupiah exchange rate as liaison variables. The data used is time series data in the period of 2008-2016. The method of analysis used is the Vector Autoregression (VAR) method with the alternative Vector Error Correction Model (VECM) model. In this research there are four variables, namely: the variable of Fed rate, Rupiah rate, and Capital Outflow as independent variable, and BI rate variable as dependent variable. From the research result, then obtained the result of causality test that the variable of The Fed rate has one-way causality with BI rate and Rupiah rate. And also the BI rate variable has one way causality to the Rupiah variable rate. While the result of Impulse Response Function (IRF) indicated that the variable of Fed rate and Capital Outflow have positive effect to BI rate, and Rupiah exchange rate variable has negative effect to BI rate. The Variance Decomoposition (VD) analysis results showed that all variables in the model (The Fed rate, Exchange rate, and Capital Outflow) have an influenced role on the BI rate change.The implication of this research is that Bank Indonesia and the government should make more efforts in maintaining the volatility of the rupiah. Especially in uncertain global economic conditions, Indonesia must have strong economic fundamentals and have a more effective monetary policy to faced the uncertainty market conditions. One of the efforts of Bank Indonesia that the researcher felt was right to overcome it, is the change of BI rate policy to BI 7-days rate. Therefore, the researcher recommends for subsequent research related with this research to use BI 7-days rate in research variables

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