The Effect of Foreign Exchange Reserves and Credit Default Swap on Exchange Rate in Indonesia

Abstract

This study aims to determine how the effect of foreign exchange reserves and credit default swap (CDS) on exchange rate in Indonesia. The exchange rate is the dependent variable in this study. Foreign exchange reserves and CDS are the independent variables in this study. The type of research used is descriptive quantitative with the Vector Error Correction Model (VECM) regression method. The data used is secondary data. The data used in this study are time series data in the form of foreign exchange reserves data represented by Bank Indonesia’s International Reserve (IRFCL) every month 2015-2023, Indonesia’s 5 Years credit default swap data every month 2015-2023, and rupiah exchange rate data against the US dollar every month 2015-2023. The results showed that the independent variable of foreign exchange reserves in the long term has no effect on the dependent variable of the exchange rate. Furthermore, it is obtained that variable CDS in the long term have a significant positive effect on the dependent variable of the exchange rate. And in the short term the independent variable of foreign exchange reserve and CDS has no effect on the dependent variable of the exchange rate.