Examination of the relevancy of 30 days forward rate unbiasedness hypothesis for the context of Indonesian Rupiah

Author : MERTOWIJOYO, KUSUMORESTU

This research examines whether the Forward Rate Unbiasedness Hypothesis (FRUH) is true for the context of Indonesian Rupiah. It tested the future spot rate against the forward rate of US Dollars (USD), Canadian Dollar (CAD), Australian Dollar (AUD), Singapore Dollar (SGD) and British Pound (GBP). The models utilized in this research are Augmented Dickey-Fuller (ADF), Rational Expectations and Lagged Rational Expectations Regression model, and Johansens's likelihood ratio. The ADF test was done to test for stationarity of the variables, the Rational Expectations and Lagged Ratinal Expectations Regressions model was used to test the FRUH, and Johansen's test was used to check the occurrence of a long term relationship between variables. The research found that FRUH holds for SGD and AUD, but there is no long term relationship between CAD's future spot and forward. For the rest of the currencies, the research found that there is a long term relationship between the future spot and the forward rate.

Keyword : exchange rate, spot rate, forward rate, forward rate unbiasedness hypothesis, interest rate parity, augmented dickey fuller, unit root, Johansen's likelihood ratio

Sumber : http://repository.petra.ac.id/1971/