THE IMPACT OF MONETARY APPROACH ON EXCHANGE RATE CASE STUDY: IN INDONESIA PERIOD 1991-2012

International trade growing high in the global economy as it developed. This happens to the growing volume and variety of goods and services to be traded in other countries. Therefore, the efforts to achieve the benefits of economic globalization must pass attempt to determine the foreign exchange rate at a favorable rate. The determination of foreign exchange rate is an important consideration for countries involved international trade (Amadau 2013). The demand and supply of currencies will change due to various factors relating to economic activities of the foreign currencies. The growth of national income of a country is a factor that will increase the demand for foreign currencies because high income will increase the demand for imports. Price level in a country will increase the demand for foreign currencies due to the tendency to import and reduce the supply foreign currencies as a results of the declined demand for exports due to high domestic prices. Expansion in money supply is a factor that will be increase. (Levy 2008) Position in foreign exchange rate in international trade that various concepts related to foreign exchange rates had been developed in an effort to determine the factors that affect foreign exchange rates. Concepts related to the determination of a floating exchange rate in 1973. Since then the exchange rate is allowed to fluctuations in the variables that influence it. (Mohi 2010)