Modeling the U.S. Federal Reserve Influence on Indonesia’s Interest Rates: A Markov-Switching Approach

Wibowo, Bintang Satrio; Mohammad Aulia Rachman; Ahmad Syahrul Fauzi; Abi Fadillah

doi:10.15294/beaj.v5i2.34287

Journal

Modeling the U.S. Federal Reserve Influence on Indonesia’s Interest Rates: A Markov-Switching Approach

Business and Economic Analysis Journal · Vol. 5 No. 2 (2025) · pp. 128–136

DOI: 10.15294/beaj.v5i2.34287
ISSN: 2798-396X, 2776-9682
Published: 2025-11-19
Publisher: Universitas Negeri Semarang
Language: eng

Abstract

This study aims to examine how changes in the United States’ monetary policy, such as interest rates and GDP, affect Indonesia’s economic policy, as reflected in Indonesia’s interest rate. The study employs the Markov Switching Dynamic Regression (MSDR) method to analyze these effects, using secondary data obtained from the Federal Reserve. This data includes variables for Indonesia’s and the United States’ interest rates, as well as other control variables. The results show that Indonesia’s interest rate, both in expansionary and contractionary conditions, tends to be influenced by the U.S. interest rate. In contrast, the U.S. GDP has no significant effect on Indonesia’s monetary policy. These findings suggest that external financial conditions, particularly those from the United States, have a significant impact on the economic situation of developing countries, including Indonesia.

Keywords

Collaboration network of the authors

21 authors · 57 co-authorship links · 1 across different organisations

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State University of Semarang
Universitas 17 Agustus 1945 Surabaya
Affiliation unknown

Different organisations
Same organisation
Affiliation unknown
Thicker line = more joint articles · bigger circle = more articles

Show as table

Co-author	Organisation	Joint articles
Yozi Aulia Rahman	Affiliation unknown	3
Puji Lestari	Affiliation unknown	2
Ahmad Nurkhin	Affiliation unknown	1
Iwan Hardi Saputro	Affiliation unknown	1
Ngabiyanto Ngabiyanto	Affiliation unknown	1
Algifari Algifari	Affiliation unknown	1
Andryan Setyadharma	Affiliation unknown	1
Luthfi Ibnu Tsani	Affiliation unknown	1
Rasyad Nu'man	Affiliation unknown	1
Ngabiyanto	Affiliation unknown	1
Moh Aris Munandar	Affiliation unknown	1
Sucihatiningsih Dian Wisika Prajanti	State University of Semarang	1
Agus Hermanto	Universitas 17 Agustus 1945 Surabaya	1
Avi Budi Setiawan	Affiliation unknown	1
Risanda Alirastra Budiantoro	Affiliation unknown	1
Sri Runtiningsih	Affiliation unknown	1
Mohammad Aulia Rochman	Affiliation unknown	1

Affiliations come from OpenAlex; journal OAI-PMH metadata carries none. Authors without an OpenAlex ID are matched by name, which can merge or split people.

Metadata source: OAI-PMH (metadata jurnal) https://journal.unnes.ac.id/journals/beaj/oai, first harvested 5 Nov 2026, last seen 5 Nov 2026.

Original metadata (oai_dc)

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	<dc:title xml:lang="en">Modeling the U.S. Federal Reserve Influence on Indonesia’s Interest Rates: A Markov-Switching Approach</dc:title>
	<dc:creator xml:lang="en">Wibowo, Bintang Satrio</dc:creator>
	<dc:creator xml:lang="en">Mohammad Aulia Rachman</dc:creator>
	<dc:creator xml:lang="en">Ahmad Syahrul Fauzi</dc:creator>
	<dc:creator xml:lang="en">Abi Fadillah</dc:creator>
	<dc:subject xml:lang="en">Interest Rates</dc:subject>
	<dc:subject xml:lang="en">MSDR</dc:subject>
	<dc:subject xml:lang="en">US Rates</dc:subject>
	<dc:description xml:lang="en">This study aims to examine how changes in the United States’ monetary policy, such as interest rates and GDP, affect Indonesia’s economic policy, as reflected in Indonesia’s interest rate. The study employs the Markov Switching Dynamic Regression (MSDR) method to analyze these effects, using secondary data obtained from the Federal Reserve. This data includes variables for Indonesia’s and the United States’ interest rates, as well as other control variables. The results show that Indonesia’s interest rate, both in expansionary and contractionary conditions, tends to be influenced by the U.S. interest rate. In contrast, the U.S. GDP has no significant effect on Indonesia’s monetary policy. These findings suggest that external financial conditions, particularly those from the United States, have a significant impact on the economic situation of developing countries, including Indonesia.</dc:description>
	<dc:publisher xml:lang="en">Universitas Negeri Semarang</dc:publisher>
	<dc:date>2025-11-19</dc:date>
	<dc:type>info:eu-repo/semantics/article</dc:type>
	<dc:type>info:eu-repo/semantics/publishedVersion</dc:type>
	<dc:type xml:lang="en">Peer-reviewed Article</dc:type>
	<dc:format>application/pdf</dc:format>
	<dc:identifier>https://journal.unnes.ac.id/journals/beaj/article/view/34287</dc:identifier>
	<dc:identifier>10.15294/beaj.v5i2.34287</dc:identifier>
	<dc:source xml:lang="en">Business and Economic Analysis Journal; Vol. 5 No. 2 (2025): November 2025; 128-136</dc:source>
	<dc:source>2798-396X</dc:source>
	<dc:source>2776-9682</dc:source>
	<dc:source>10.15294/beaj.v5i2</dc:source>
	<dc:language>eng</dc:language>
	<dc:relation>https://journal.unnes.ac.id/journals/beaj/article/view/34287/7071</dc:relation>
	<dc:rights xml:lang="en">Copyright (c) 2025 Business and Economic Analysis Journal</dc:rights>
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