Future Spot Rate: The Implications in Indonesia

R Adisetiawan, Pantun Bukit, Ahmadi Ahmadi

Abstract


Investors, multinational companies and governments require a rate forecasting to make informed decisions about the hedging of debts and receivables, funding and short-term investments, capital budgeting and long-term financing. The process of making forecasting from market indicators, known as market-based forecasting, is usually developed based on spot rates and forward rates. The current spot rate can be used as forecasting, as the exchange rate reflects the market estimate of the spot rate in a short period of time. The forward rate is used in forecasting, as the exchange rate reflects the market estimate of the spot rate at the end of the forecasting period. Based on the research conducted by Chiang (1986) of the samples used, empirical evidence indicates spot rates and forward rates are significant as predictors of future spots. Empirical evidence suggests that spot rates provide better forecasting results compared to forward rates. The research uses regression models for market-based forecasting methods. The variables used in this study are spot rates, forward rates and future spots. The samples used are from Bank Indonesia for spot rates in January – March 2019 and future spot in April – June 2019, and from Jakarta Futures exchange for forward rates in January – March 2019. The Stochastic and Chow Test models are selected and their use has been evaluated using quality and precise testing measures. Based on the sample period used, empirical evidence suggests that spot rates and forward rates are significant in predicting future spots for EUR, JPY and AUD currencies. Current spot rates provide better forecasting results in predicting Future spot compared to the forward rate. Both the 15Ft">  and 15St">  coefficient are sensitive to new information from the variation of the coefficient and time, it can increase the forecasting of the equation to each currency exchange rate used. The study states that variables from time series should be effectively utilized and utilized in predicting currency exchange rates, as this research demonstrates the absence of dependence on time series Can be concluded that foreign exchange rates in each country follow a pattern that is not stationary. The spot Euro exchange rate turns out to be statistically more accurate with an error rate of 0.004144% forecasting with the value of regression coefficient of Euro exchange rate is a Future Spot = 21.504,88 – 0.341229Spot + 15et+1"> .


Keywords


Spot rate; Forward rate; Future Spot

Full Text:

PDF

References


Adisetiawan, R. (2017, September 30). Globalisasi Pasar Modal Dunia dan Pengaruhnya Terhadap Pasar Modal Indonesia. Ekonomis: Journal of Economics and Business, 1(1), 10-17. doi:http://dx.doi.org/10.33087/ekonomis.v1i1.19

Adisetiawan, R. (2018, Maret 23). Kausalitas Ekonomi Makro dan Global Terhadap Pasar Modal Indonesia. Ekonomis: Journal of Economics and Business, 2(1), 66-80. doi:http://dx.doi.org/10.33087/ekonomis.v2i1.32

Adisetiawan, R., Atikah. (2018, May 14). Does Stock Split Influence to Liquidity and Stock Return? (Empirical Evidence in The Indonesian Capital Market). Asian Economic and Financial Review, 8(5), 682-690. doi:10.18488/journal.aefr.2018.85.682.690

Adisetiawan, R., Yunan Surono. (2016). Indonesian capital market efficiency. British Journal of Economics, Finance and Management Sciences, 11(1), 108-121.

Brzeszczynsky, Janusz., Robert Kelm. (2001). Short-Term dependencies between volatility of Currency, Money and Capital Markets the Case of Poland. Journal of Econometric.

Caporalea, Guglielmo Maria., Fabio Spagnolo, Nicola Spagnolo. (2018, December). Exchange rates and macro news in emerging markets. Research in International Business and Finance, 46, 516-527. doi:https://doi.org/10.1016/j.ribaf.2018.06.007

Chiang, T. C. (1986). Empirical Analysis on the Predictors of Future Spot Rates. Journal of Financial, 9(2), 153-162. doi:https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1475-6803.1986.tb00444.x

Chiang, T. C. (1988, May). The Forward Rate as a Predictor of the Future Spot Rate – A Stockhastic Coefficient Approach. Journal of Money, Credit and Banking, 20(2), 212-232. doi:10.2307/1992112

Ebiringa, Oforegbunam Thaddeus, Anyaogu, Nnneka, B. (2014, June). Exchange Rate, Inflation and Interest Rates Relationships: An Autoregressive Distributed Lag Analysis. Journal of Economics and Development Studies, 2(2), 263-279. Retrieved from http://jedsnet.com/vol-2-no-2-june-2014-abstract-15-jeds#j_menu

Faisal, M. (2001). Manajemen Keuangan Internasional. Jakarta: PT Salemba Empat.

Fama, E. F. (1984, November). Forward and spot exchange rates. Journal of Monetary Economics, 14(3), 319-338. doi:https://doi.org/10.1016/0304-3932(84)90046-1

Ghozali, I. (2011). Aplikasi Analisis Multivariate dengan Program SPSS (4 ed.). Semarang: Badan Penerbit Universitas Diponegoro.

He, Kaijian., Lei Ji, Geoffrey K.F. Tso, Bangzhu Zhu, Yingchao Zou. (2018). Forecasting Exchange Rate Value at Risk using Deep Belief Network Ensemble based Approach. Procedia Computer Science, 139, 25-32. doi:https://doi.org/10.1016/j.procs.2018.10.213

Inouea, Atsushi., Barbara Rossib. (2019, May). The effects of conventional and unconventional monetary policy on exchange rates. Journal of International Economics, 118, 419-447. doi:https://doi.org/10.1016/j.jinteco.2019.01.015

Jayanti, Yusnita,. Darminto, Nengah Sudjana. (2014, Juni). Pengaruh Tingkat Inflasi, Tingkat Suku Bunga SBI, Nilai Tukar Rupiah, Indeks Dow Jones, dan Indeks KLSE Terhadap Indeks Harga Saham Gabungan (IHSG): Studi Pada Bursa Efek Indonesia Periode Januari 2010 – Desember 2013. Jurnal Administrasi Bisnis (JAB), 11(1), 1-10. Retrieved from http://administrasibisnis.studentjournal.ub.ac.id/index.php/jab/article/view/473

Keivan Mallahi-Karaia, Pedram Safari. (2018, August). Future exchange rates and Siegel's paradox. Global Finance Journal, 37, 168-172. doi:https://doi.org/10.1016/j.gfj.2018.04.007

Kowanda, Dionysia., Sugiharti Binastuti, Rowland Bismark Fernando Pasaribu, Marina Ellim. (2014, Agustus). Pengaruh Bursa Saham Global, ASEAN, dan Harga Komoditas Terhadap Indeks Harga Saham Gabungan, dan Nilai Tukar EUR/USD. Jurnal Akuntansi & Manajemen (JAM), 25(2), 79-88. Retrieved from http://stieykpn.ac.id/journal/index.php/jam/issue/view/103

Kuncoro, M. (2001). Manajemen Keuangan Internasional: Pengantar Ekonomi dan Bisnis Global (2 ed.). Yogyakarta: Badan Penerbit Fakultas Ekonomi.

Lustig, Hanno., Nikolai Roussanov, Adrien Verdelhan. (2014, March). Countercyclical currency risk premia. Journal of Financial Economics, 111(3), 527-553. doi:https://doi.org/10.1016/j.jfineco.2013.12.005

Ma, Xuping., Jun Wang, Xiaolei Sun. (2018). A study on the dynamics of exchange rate volatility spillover network: Evidence from Central Asia. Procedia Computer Science, 139, 76-81. doi:https://doi.org/10.1016/j.procs.2018.10.220

Madura, J. (2011). International Corporate Financial: Keuangan Perusahaan Internasional (8 ed.). Jakarta: PT Salemba Empat.

Mahapatra, Smita., Saumitra N. Bhaduri. (2019, March). Dynamics of the impact of currency fluctuations on stock markets in India: Assessing the pricing of exchange rate risks. Borsa Istanbul Review, 19(1), 15-23. doi:https://doi.org/10.1016/j.bir.2018.04.004

Muchlas, Zainul., Agus Rahman Alamsyah. (2015, Februari). Faktor-faktor yang Mempengaruhi Kurs Rupiah terhadap Dolar Amerika Pasca Krisis (2000-2010). Jurnal Ilmiah Bisnis dan Ekonomi Asia (JIBEKA), 9(1), 76-86. doi:https://doi.org/10.32812/jibeka.v9i1

Ramasamy, Ravindran., Soroush Karimi Abar. (2015, February). Influence of Macroeconomic Variables on Exchange Rates. Journal of Economics, Business and Management, 3(2), 276-281. doi:10.7763/JOEBM.2015.V3.194

Sarno, Lucio., Paul Schneider, Christian Wagner. (2012, August). Properties of foreign exchange risk premiums. Journal of Financial Economics, 105(2), 279-310. doi:https://doi.org/10.1016/j.jfineco.2012.01.005

Sarpong, S. (2019, April). Estimating the probability distribution of the exchange rate between Ghana Cedi and American dollar. Journal of King Saud University - Science, 31(2), 177-183. doi:https://doi.org/10.1016/j.jksus.2018.04.023

Tafa, J. (2015, July). Relationship between Exchange Rates and Interest Rates: Case of Albania. Mediterranean Journal of Social Sciences, 6(4), 163-170. doi:10.5901/mjss.2015.v6n4p163

Wang, G. J. (2015, August 25). A Note on the Size of Forward Exchange Rate Bias. International Journal of Economics and Finance, 7(9), 237-243. doi:10.5539/ijef.v7n9p237

Yu, J. (2013, May). A sentiment-based explanation of the forward premium puzzle. Journal of Monetary Economics, 60(4), 474-491. doi:https://doi.org/10.1016/j.jmoneco.2013.04.001




DOI: http://dx.doi.org/10.33087/jiubj.v20i1.874

Refbacks

  • There are currently no refbacks.


Creative Commons License
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

ADRESS JOURNAL

JURNAL ILMIAH UNIVERSITAS BATANGHARI JAMBI (JIUBJ)
Published by Lembaga Penelitian dan Pengabdian kepada Masyarakat
Adress: Jl.Slamet Ryadi, Broni-Jambi, Kec.Telanaipura, Kodepos: 36122, email: jiubj.unbari@gmail.com, Phone: 0741-670700

Creative Commons License This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.