Rosnawintang . - Department of Economics, Universitas Halu Oleo, Kendari ۹۳۲۳۲, Indonesia
Muh. Syarif - Department of Economics, Universitas Halu Oleo, Kendari ۹۳۲۳۲, Indonesia
Aini Indrijawati - Department of Accounting, Universitas Hasanuddin, Makassar ۹۰۲۴۵, Indonesia
Pasrun Adam - Department of Economics, Universitas Halu Oleo, Kendari ۹۳۲۳۲, Indonesia
La Ode Saidi - Department of Economics, Universitas Halu Oleo, Kendari ۹۳۲۳۲, Indonesia

The aim of this study was to examine the causal relationship between exchange rate and bond yield in Indonesia using monthly time series data from January ۲۰۰۶ to December ۲۰۱۸. The exchange rate was proxied by IDR/USD, while the bond yield was proxied by a ۱۰-year government bond yield. The VAR model and Granger causality test were used to test the relationship. The results of the test revealed that in the short-run, there is a two-way relationship between IDR/USD exchange rate and government bond yield. In the short term, the response of the government bond yield to the IDR/USD exchange rate was very strong (significant۱%) and also positive in the first three months period. Meanwhile, the response of the IDR/USD exchange rate against the government bond yield was weak (significant ۱۰%). In addition, it was negative in the first ۳.۵ month period. Furthermore, the study revealed that there is no long-term relationship between the IDR/USD exchange rate and the government bond yield.

Exchange rate, Bond yield, VAR Model, Granger Causality