New normal policy on the Rupiah exchange rate using Long Short-Term Memory

Abstract

Since the world is facing health problems due to COVID-19, Indonesia was not success to surge the outbreak. In addition to the risk of health problems, this pandemic is also disrupting the global economy. The rupiah exchange rate also saw a devaluation during the COVID 19 outbreak. The Indonesian economy is expected to grow negatively in the third quarter of 2020 and predicted to continue until the end of the year. The measure from the government impacted the economic circumstances then along with the decline in new cases of the spread of COVID-19 the government was implementing a new normal, after the completion of large scale social restrictions weakened the economic development, with one of its goals to improve and try to save Indonesia’s economy from a possible worse recession. This study attempts to use the forecasting method to find out whether the application of the new normal will strengthen the Rupiah exchange rate in the coming period. The methods that will be used is Long Short Term Memory as the best model to overcome long-term dependencies to obtain a predictive model that most closely approximates existing data patterns. The most suitable model is Long Short Term Memory with 50 epochs using five hidden neurons. Based on the results, it seems that the Rupiah exchange rate tends to weaken in the next five-day.