The Impact of Redenomination in Indonesia from Indonesian Citizens’ Perspective

Abstract

Redenomination, suddenly came up again in 2010, when the central bank of Indonesia announced their plan to redenominate rupiah currency up to three zeroes. Many questions came up, what is the impact of redenomination, or is it the same as sanering policy that happened in 1950. Although the governor of the central bank of Indonesia, Darmin Nasution has confirmed that redenomination is different with sanering, it still cause pro and contra. Many countries have already implemented redenomination, and many of them succeeded, but many of them fail. To make redenomination success the most important things are low inflation rate, stable economic growth, guarantee of price stability and good socialization to the society. The objectives of this study are to know the impact of implementing redenomination in Indonesia from Indonesia citizens’ perspective. The variable that is used in this study is only one, redenomination with 8 indicators. The sample data is taken from 100 peoples, who know what is redenomination. The results have been analyzed by using Structural Equation Modelling. The result shows that the greatest impact of redenomination according to Indonesia citizens is restoring the credibility of Indonesia (lambda loading = 0.87), followed by that redenomination is favorable for Indonesian citizens (lambda loading = 0.86).

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