{
    "success": true,
    "data": {
        "id": 1788390,
        "msgid": "stabilising-the-rupiah-exchange-rate-1780803067",
        "date": "2026-06-06 17:05:46",
        "title": "Stabilising the Rupiah Exchange Rate",
        "author": "Lida Puspaningtyas",
        "source": "REPUBLIKA",
        "tags": "",
        "topic": "Economy",
        "summary": "Islamic economics expert Adiwarman A. Karim argues that the current depreciation of the Rupiah is driven by market 'noise' rather than economic fundamentals. He highlights how the presence of noise traders creates volatility and disconnects the exchange rate from the nation's underlying economic strength.",
        "content": "<p>In the article \u201cDollar Exchange Rate Mismatch\u201d, the distinction\nbetween \u2018voice\u2019 and \u2018noise\u2019 factors in dollar exchange rate volatility\nwas explained. The \u2018voice\u2019 factor reflects economic fundamentals,\nwhereas the \u2018noise\u2019 factor represents market anxiety. The current\nweakening of the Rupiah does not reflect economic fundamentals due to\nthe significant influence of the noise factor.<\/p>\n<p>Firstly, as market anxiety increases, more noise traders become\ninvolved in transactions. Researchers Jeanne and Rose from the National\nBureau of Economic Research (NBER), in their study \u201cNoise Trading and\nExchange Rate Regimes\u201d, explain that the presence of noise traders can\ncreate multiple equilibria within the foreign exchange market.<\/p>\n<p>The entry of noise traders increases exchange rate volatility risks\nwhile simultaneously distributing those risks. Secondly, the high volume\nof noise traders causes a disconnect between economic fundamentals and\nthe Rupiah exchange rate.<\/p>\n<p>Devereux and Engel, researchers at the NBER, in their study \u201cExchange\nRate Pass-Through, Exchange Rate Volatility, and Exchange Rate\nDisconnect\u201d, explain the factors causing exchange rate movements to fail\nto reflect a country\u2019s economic fundamentals. These include: first,\nincomplete international financial markets; second, international price\nstructures and product distribution that nullify or minimise the wealth\neffect of exchange rate movements; and third, the existence of\nstochastic deviations from uncovered interest rate parity (UIP). A\nminimal wealth effect is evidenced by the low return of export foreign\nexchange earnings to Indonesia.<\/p>",
        "url": "https:\/\/jawawa.id\/newsitem\/stabilising-the-rupiah-exchange-rate-1780803067",
        "image": ""
    },
    "sponsor": "Okusi Associates",
    "sponsor_url": "https:\/\/okusiassociates.com"
}