RAKA RAHMAN

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BISNIS INTERNASIONAL CE

CHAPTER 4

Monetary policy is the process of regulating the money supply of a country to achieve a specific purpose , such as to contain inflation reaches full employment or more prosperous . Monetary policy can involve menggeset lending standards , " margin requirement " , the capitalization of the bank or even act as the last business borrowers through negotiations or through agreements with other governments .

Monetary policy is primarily a policy that aims to achieve internal balance ( high economic growth , price stability , equitable development ) and external balance ( balance of payments ) as well as the achievement of macroeconomic objectives , namely maintaining economic stabilization that can be measured by employment , price stability and balance of international payments balance . If stability in economic activity disrupted , then monetary policy can be used to recover ( stabilization measures ) . The influence of monetary policy will first be felt by the banking sector , which is then transferred to the real sector .The objective of monetary policy, among others, to achieve the following:

Maintaining Economic Stability. Creating Employment Opportunities. Price Stability.

EXCHANGE RATE

             The exchange rate is the price of a currency against other currencies, or the value of a currency against other currencies (Salvatore1997: 9). The increase in the exchange rate of the domestic currency in the so-called foreign currency appreciation. The decline in the exchange rate in the country called the foreign currency depreciation. Factors Affecting the Exchange Rate: There are several key factors that affect the level of the exchange rate of the domestic currency against foreign currencies. These factors are as follow

1 . The inflation rate relative

             In foreign exchange markets , international trade in the form of goods or services into a primary basis in the foreign exchange market , so that changes in domestic prices relative to foreign prices is seen as a factor that affects the movement of foreign exchange rates . For example , if the U.S. as a trading partner of Indonesia experienced high inflation rate of the price of American goods also becomes higher , so the demand for merchandise automatic relative decline .

2 . Relative income levels

     Other factors affecting demand and supply in the foreign exchange market is the real pertumuhan rate of prices abroad. Rate of real growth is expected to weaken in nenegri foreign exchange rates . While the domestic real income will increase the demand for foreign currencies relative compared to the available supply .

3 . Interest rates relative

     The increase in interest rates resulting in activity in the country more attractive to investors in the country and abroad . Ppenanaman the capital value of the currency tends mengakibatkannaiknya that everything depends on the magnitude of the difference in interest rates in the country and abroad, it is necessary to see which one is cheaper , inside or outside the country . Thus, the source of those differences will lead to an increase in foreign exchange rates of the domestic currency .

4 . government control