The Linkage of US Monetary Policy and Stock Markets Toward Indonesia Stock Markets

International Conference on Islamic Economics and Economies of the OIC Countries, 2009

15 Pages Posted: 29 Nov 2010

See all articles by Muhamad Abduh

Muhamad Abduh

International Islamic University of Malaysia (IIUM)

Date Written: April 28, 2009

Abstract

The aim of this paper is to examine the interdependence revulsion of Indonesia Stock Markets (JCI) with the changes in US Monetary policy and Stock Markets (DJCI). The methodology used in this study is time series econometric techniques i.e. the unit root test, co-integration test, Granger’s causality and Vector Error Correction Model (VECM). The result reveals a short-term and long-term dynamic relationship between the US stock markets and the Indonesia one. A 1 percent increase in US stock markets contributes to Indonesia stock markets by 0.4 percent over the next 10 months. One of the policy implications is that the authority of Indonesia stock markets should strengthen and improve their regulations so that the susceptible of the stock markets can be minimized.

Keywords: Indonesia, United States, Error Correction Model, Granger Causality.

JEL Classification: C52, E52, G15

Suggested Citation

Abduh, Muhamad, The Linkage of US Monetary Policy and Stock Markets Toward Indonesia Stock Markets (April 28, 2009). International Conference on Islamic Economics and Economies of the OIC Countries, 2009, Available at SSRN: https://ssrn.com/abstract=1716444

Muhamad Abduh (Contact Author)

International Islamic University of Malaysia (IIUM) ( email )

Jalan Gombak
Kuala Lumpur, 53100
Malaysia

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