The Effect Of United State Of America (U.S) Dollar To Indonesian Rupiah Exchange Rate Volatility Towards National Consumption (Study Case In Indonesia for the period of 1986-2014)

Abstract

Basically, volatility could be defined as movement of exchange rate between local to foreign currency, in this research Rupiah and United Stated (U.S) Dollar as a model. While every movement could influence the decrease value of Rupiah (depreciation), and increase the value of Rupiah (appreciation). It is assumed that it will change the pattern of consumption even in positive or negative way or no influence at all. Indonesia as Developing Country has many tourist spot which almost 70% of Consumption is valued as Total of GDP. It becomes the reason of researcher to do research on the pattern of consumption. As a developing country the trend or tendency consumption has tight correlation with saving and investment. Because of that, the researcher did a research by figuring out Consumption as Dependent variable while Interest Rate, GDP, Exchange Rate, Exchange Rate Volatility as Independent Variable. Error Correction Model (ECM) in E-Views was the tool to answer the hypothesis and to analyze the research. The result of exchange rate was significant in the long run but not significant in short run. Interest rate did not affect the consumption pattern both in the short and long run. The volatility did not affect consumption both in short and long run.