Managing Global Business by Minimizing the Effects of Rupiah’s Volatility

Abstract

As global business players, managing a good business with others from abroad cannot avoid Rupiah’s volatility to hard currencies, such as United States Dollar (USD), Euro, and Japan Yen (JPY). Impacts of subprime mortgage crisis in United States has extended into Indonesia since 2007 was shown by depreciation of Rupiah that was Rp12.000 for 1USD in the 4th quarter in 2008. Determinants of rupiah to USD from 2006 to 2009 are important to know to prevent the expansion of the subprime mortgage impacts for global business players. The determinants based on monetary approach, that developed form purchasing power parity and money quantity approach. Those can indicate the development of Indonesia’s economics in the future so that the global business player can minimize the effects of Rupiah’s volatility. This research is to give evidences about influence of the determinants, which are money supply, interest rates, inflation, gross domestic product, balance of payment, and premium risk (as independent variables), to rupiah’s volatility to USD. The research is a descriptive-qualitative research that used secondary data and documentary method. The results showed that money supply, interest rates, inflation, gross domestic product, balance of payment, and premi risk influenced the volatility of rupiah to USD simultanously. Partially, interest rates, inflation, premi risk, and balance of payment did not significantly influence to the rupiah’s volatility to USD. The results indicate that monetary policies, such as low interest policy, that was followed by control of inflation, premi risk, balance of payment, and gross domestic product in Indonesia, and United States, can appreciate rupiah to USD. It creates a better stability and security in the Indonesia’s economic and supports global business players in Indonesia to have relation with others from abroad.