The findings come from an analysis of Indonesian monthly data covering January 2015 to December 2024. Published in 2026 in the Formosa Journal of Multidisciplinary Research, the study provides evidence that rupiah movements cannot be explained solely by domestic economic policies because developments in global financial markets also play an important role.
The research is particularly relevant because the rupiah experienced considerable depreciation during the observation period. The study records the exchange rate moving from approximately Rp12,625 per US dollar in 2015 to nearly Rp16,157 per US dollar in 2024. The period also included major global shocks, including the COVID-19 pandemic, the Russia-Ukraine war, rising global interest rates, and the energy crisis.
Researchers Combine Domestic and Global Factors
Muflihatul Adawiyah and Aminudin Ma’ruf examined seven variables that could influence the IDR/USD exchange rate.
These variables were money supply (M2), inflation, the CBOE Volatility Index (VIX), Indonesia’s geopolitical risk, foreign debt, the BI Rate, and WTI crude oil prices.
The researchers used monthly secondary data and analyzed the relationships using the Autoregressive Distributed Lag (ARDL) approach. In simple terms, the method allowed the researchers to examine whether changes in each factor were associated with movements in the rupiah both in the short term and over the longer term.
The analysis also found evidence of a long-term relationship among the variables. The cointegration test produced an F-statistic of 43.14528, above the reported critical bounds, indicating that the variables moved within a long-term economic relationship during the observation period.
Money Supply Puts Pressure on the Rupiah
One of the clearest findings concerns the amount of money circulating in Indonesia.
The study found that money supply had a positive and statistically significant relationship with the IDR/USD exchange rate in both the short and long term. The short-term coefficient was 0.261787, while the long-term coefficient reached 0.269727.
Because a higher IDR/USD exchange rate means more rupiah are required to obtain one US dollar, the researchers interpret the result as indicating that an increase in money supply can contribute to rupiah depreciation.
The researchers explain that excessive liquidity can place pressure on the currency when the growth of money supply is not matched by growth in real economic production. Greater liquidity can also reduce interest rates and encourage capital movements that increase demand for US dollars.
Global Market Fear Also Weakens the Rupiah
Another significant factor is VIXCLS, an indicator commonly associated with investor anxiety and volatility in financial markets.
The study found that VIXCLS had a significant positive relationship with the IDR/USD exchange rate in both the short and long term. Its short-term coefficient was 0.000197, with a probability value below 0.05, while its long-term coefficient was 0.000203.
The implication is straightforward: when global financial uncertainty rises, investors tend to become more risk-averse. Capital can move toward assets perceived as safer, including the US dollar. This can increase pressure on emerging-market currencies such as the rupiah.
According to Adawiyah and Ma’ruf of Universitas Negeri Surabaya, changes in global risk sentiment can therefore transmit directly into Indonesia’s foreign exchange market.
Foreign Debt Shows a Significant Relationship
Foreign debt also emerged as a significant variable in the model.
The estimated short-term coefficient was -1.273961, while the long-term coefficient was -1.312601, with probability values of 0.0000. In the model, the negative relationship means an increase in foreign debt was associated with a lower IDR/USD exchange rate, which the researchers interpreted as rupiah appreciation during the observed period.
The researchers explain that foreign borrowing can bring foreign currency into Indonesia. These inflows can increase the availability of foreign exchange and support reserves, potentially strengthening the rupiah.
However, the study’s discussion also notes that foreign debt creates future foreign-currency payment obligations. Therefore, the relationship between debt and exchange rates can depend on how borrowed funds affect foreign exchange flows and the broader balance of payments.
WTI Oil Prices Affect Exchange Rate Dynamics
WTI crude oil prices were another significant factor.
The study found a negative and significant relationship between WTI prices and the IDR/USD exchange rate in both the short and long term. The coefficient was -0.000472 in the short term and -0.000486 in the long term.
The researchers connect this finding to Indonesia’s external economic position. Changes in international oil prices can influence trade flows, foreign exchange earnings, import costs, and investor expectations.
The result also shows why commodity markets matter when assessing the rupiah. Movements in international oil prices can have consequences beyond the energy sector and eventually affect currency markets.
Inflation and BI Rate Were Not Significant
Interestingly, the study did not find statistically significant effects from inflation, Indonesia’s geopolitical risk index, or the BI Rate during 2015–2024.
Inflation recorded probability values of 0.3825 in the short term and 0.3846 in the long term, while the BI Rate recorded 0.6626 and 0.6617, respectively. Both were above the 5 percent significance threshold.
Indonesia’s geopolitical risk indicator was also statistically insignificant, with probability values of 0.3423 in the short term and 0.3414 in the long term.
The finding does not mean these factors are irrelevant to the Indonesian economy. Rather, within the model and observation period used by Adawiyah and Ma’ruf, their measured effects were not strong enough to be considered statistically significant.
The researchers suggest that global conditions, investor expectations, and capital flows can sometimes overshadow the direct influence of domestic interest-rate policy on exchange rates.
Implications for Economic Policy
The findings from Universitas Negeri Surabaya point to the importance of managing both domestic monetary conditions and external vulnerabilities when maintaining rupiah stability.
For policymakers, monitoring money supply and global financial volatility is particularly important. Meanwhile, developments in foreign debt and international commodity prices should also be incorporated into assessments of exchange rate risks.
For businesses, the study highlights the value of monitoring global indicators rather than relying exclusively on domestic economic data. Companies exposed to foreign currencies, international trade, or imported commodities may face exchange-rate risks when global financial sentiment changes rapidly.
The researchers conclude that rupiah stability requires policies that consider both domestic fundamentals and external developments.
The study also acknowledges limitations. Its data end in December 2024, so the model does not capture rupiah dynamics during 2025–2026. The researchers recommend future studies include factors such as foreign exchange reserves, trade balance, foreign capital flows, the Federal Funds Rate, the US Dollar Index, and gold prices.
Author Profile
Muflihatul Adawiyah is the first author and corresponding author of the study, affiliated with Universitas Negeri Surabaya. The article does not provide her academic degree or a detailed professional specialization.
Aminudin Ma’ruf is the second author and is also affiliated with Universitas Negeri Surabaya. The published article does not state his academic degree or detailed field of expertise.
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