Indonesian Stock Market Reaction: Effects of Uncertainty Policy Shocks in the United States and China

Rilmia Oktavian; Alvin Sugeng Prasetyo

doi:10.29259/jep.v21i1.20658

Indonesian Stock Market Reaction: Effects of Uncertainty Policy Shocks in the United States and China

Rilmia Oktavian, Alvin Sugeng Prasetyo

Abstract

The purpose of this study is to examine and analyze the effect of economic policy uncertainty US and China on the Indonesian stock market. The data uses time series, from January 2000-July 2022. The methods used are the Structural Vector Error Correction Model (SVECM). The results show that the uncertainty of the US and China's economic policies has a negative and significant effect on the Indonesian stock market. The response of Indonesian stock market responded negatively to the economic policy uncertainties of the US and China. The results of the study show that the uncertainty of the US and China's economic policies has a negative and significant effect on the Indonesian stock market. The response of Indonesian stock market responded negatively to the economic policy uncertainties of the United States and China. The results of the study show that the uncertainty of the US and China's economic policies has a negative and significant effect on the Indonesian stock market. Indonesian stock market responded negatively to the economic policy uncertainties of the United States and China.

Keywords

China's Economic Policy Uncertainty, United States Economic Policy Uncertainty, SVECM, Indonesian Stock Market, Time Series Data

Full Text:

PDF

References

Abbas, G., & Wang, S. (2020). Does macroeconomic uncertainty really matter in predicting stock market behavior? A comparative study on China and USA. China Finance Review International, 10(4), 393–427. https://doi.org/10.1108/CFRI-06-2019-0077

Abidin, S. Z., & Banchit, A. (2019). Causality and cointegration of stock markets within the asian growth triangle. Proceeding International Congress on Modelling and Simulation, December, 498–504. https://doi.org/10.36334/modsim.2019.e1.abidin

Adediran, I. A., & Akpa, E. O. (2022). A Note on the Transmission of Policy Uncertainty Shocks on Asia- Pacific Stock Returns. Asian Economics Letters, 3(3), 1–7.

Adisetiawan, R., & Ahmadi, A. (2018). Contagion Effect Antar Negara Asean-5. J-MAS (Jurnal Manajemen Dan Sains), 3(2), 203. https://doi.org/10.33087/jmas.v3i2.58

Aggarwal, P., & Saqib, N. (2017). Impact of Macro Economic Variables of India and USA on Indian Stock Market. International Journal of Economics and Financial, 7(4), 10–14.

Alam, Q. N. (2020). Impacts of macroeconomic variables on the stock market returns of South Asian Region. Canadian Journal of Business and Information Studies Journal, 2(2), 24–34.

Al-Ameer, M., Hammad, W., Ismail, A., & Hamdan, A. (2018). The relationship of gold price with the stock market: The case of frankfurt stock exchange. International Journal of Energy Economics and Policy, 8(5), 357–371.

Alamgir, F., & Amin, S. Bin. (2021). The nexus between oil price and stock market : Evidence from South Asia. Energy Reports, 7, 693–703. https://doi.org/10.1016/j.egyr.2021.01.027

Albulescu, C. T., Aubin, C., & Goyeau, D. (2017). Stock prices, inflation and inflation uncertainty in the U.S.: testing the long-run relationship considering Dow Jones sector indexes. Applied Economics, 49(18), 1794–1807. https://doi.org/10.1080/00036846.2016.1226491

Alkhazali, O. M., & Zoubi, T. A. (2020). Gold and portfolio diversification: A stochastic dominance analysis of the Dow Jones Islamic indices. Pacific Basin Finance Journal, 60(June 2019), 101264. https://doi.org/10.1016/j.pacfin.2020.101264

Alshubiri, F. (2021). Portfolio Returns of Islamic Indices and Stock Prices in GCC Countries : Empirical Evidence From the ARDL Model. SAGE Open, 1–16. https://doi.org/10.1177/21582440211018460

Al-Thaqeb, S. A., Algharabali, B. G., & Alabdulghafour, K. T. (2020). The pandemic and economic policy uncertainty. International Journal of Finance and Economics, 27(3), 2784–2794. https://doi.org/10.1002/ijfe.2298

Antonakakis, N., Gupta, R., & Tiwari, A. K. (2017). Has the correlation of inflation and stock prices changed in the United States over the last two centuries? Research in International Business and Finance, 42, 1–8. https://doi.org/10.1016/j.ribaf.2017.04.005

Arjoon, R., Botes, M., Chesang, L. K., & Gupta, R. (2012). The long-run relationship between inflation and real stock prices: Empirical evidence from South Africa. Journal of Business Economics and Management, 13(4), 600–613. https://doi.org/10.3846/16111699.2011.620162

Artini, L. G. S., Aryati, N. T., Lestari, P. V., Darmayanti, N. P. A., & Sudiartha, G. M. (2017). Analisis Fundamental Makro Dan Integrasi Pasar Saham Dunia Dengan Bursa Efek Indonesia. Matrik : Jurnal Manajemen, Strategi Bisnis Dan Kewirausahaan, 11(2), 128. https://doi.org/10.24843/matrik:jmbk.2017.v11.i02.p03

Badullahewage, S. U. (2018). The Effects of Macroeconomic Factors on the Performance of Stock Market in Sri Lanka. International Journal of Innovation and Economic Development, 3(6), 33–41. https://doi.org/10.18775/ijied.1849-7551-7020.2015.36.2002

Basit, A. (2020). Pengaruh Harga Emas Dan Minyak Dunia Terhadap Indeks Harga Saham Gabungan (IHSG) Periode 2016-2019. Jurnal Aplikasi Akuntansi, 5(1), 42–51. https://doi.org/10.29303/jaa.v5i1.89

Bennett, N., & Lemoine, G. J. (2014). What a difference a word makes: Understanding threats to performance in a VUCA world. Business Horizons, 57(3), 311–317. https://doi.org/10.1016/j.bushor.2014.01.001

Bouoiyour, J., Selmi, R., Shahzad, S. J. H., & Shahbaz, M. (2017). Response of stock returns to oil price shocks: Evidence from oil importing and exporting countries. Journal of Economic Integration, 32(4), 954–977. https://doi.org/10.11130/jei.2017.32.4.954

Bouri, E., Jain, A., Biswal, P. C., & Roubaud, D. (2017). Cointegration and nonlinear causality amongst gold, oil, and the Indian stock market: Evidence from implied volatility indices. Resources Policy, 52(May 2016), 201–206. https://doi.org/10.1016/j.resourpol.2017.03.003

Chiang, T. C. (2022). Evidence of Economic Policy Uncertainty and COVID-19 Pandemic on Global Stock Returns. Journal of Risk and Financial Management.

Das, D., Kannadhasan, M., & Bhattacharyya, M. (2019). Do the emerging stock markets react to international economic policy uncer- tainty, geopolitical risk and financial stress alike? North American Journal of Economics and Finance. https://doi.org/10.1016/j.najef.2019.01.008

Dewi, Risna, & Nawawi, Z, M. (2022). Analysis of The Development of Import Exports of Economic Goods Group in North Sumatra Province in 2016-2020. Jurnal Pamator, 15(1), 137-145

Ding, Z., Liu, Z., Zhang, Y., & Long, R. (2017). The contagion effect of international crude oil price fluctuations on Chinese stock market investor sentiment. Applied Energy, 187, 27–36. https://doi.org/10.1016/j.apenergy.2016.11.037

Farooq, O., & Ahmed, N. (2018). Does inflation affect sensitivity of investment to stock prices? Evidence from emerging markets. Finance Research Letters, 25, 160–164. https://doi.org/10.1016/j.frl.2017.10.019

Gao, J., Zhu, S., O’Sullivan, N., & Sherman, M. (2019). The Role of Economic Uncertainty in UK Stock Returns. Journal of Risk and Financial Management, 12(1), 5. https://doi.org/10.3390/jrfm12010005

Hadi, S. (2018). Keterkaitan Pasar Modal di Amerika Serikat, Indonesia dan Korea Selatan. Jurnal Inovasi Ekonomi, 3(01), 19–22. https://doi.org/10.22219/jiko.v3i01.5526

Hamidi, H. N. A., Khalid, N., & Karim, Z. A. (2018). Revisiting relationship between Malaysian stock market index and selected macroeconomic variables using asymmetric cointegration. Jurnal Ekonomi Malaysia, 52(1), 311–319.

Hung, N. T. (2022). Re-study on dynamic connectedness between macroeconomic indicators and the stock market in China. Romanian Journal of Economic Forecasting, 2.

Hussein, A. A. (2020). Effect of inflationary expectations on stock market returns in Nigeria. Journal of Economic Studies.

Ilhan, A., & Akdeniz, C. (2020). The impact of macroeconomic variables on the stock market in the time of COVID-19 : The case of Turkey. Journal of Research in Economics, Politics & Finance, 5(3), 893–912. https://doi.org/10.30784/epfad.810630

John, E. I. (2019). Effect of Macroeconomic Variables on Stock Market Performance in Nigeria. Journal of Economics Management and Trade, 22(6), 1–14. https://doi.org/10.9734/jemt/2019/v22i630110

Kannadhasan, M., & Das, D. (2020). Do Asian emerging stock markets react to international economic policy uncertainty and geopolitical risk alike? A quantile regression approach. Finance Research Letters, 34(August 2019), 1–7. https://doi.org/10.1016/j.frl.2019.08.024

Karim, A. (2020). Does the Covid-19 Pandemic Affect the Stock Market in Indonesia. ACADEMIA Accelerating the World’s Research, 24(1), 33–47. https://doi.org/10.22146/jsp.

Karim, Z. A., Karim, B. A., & Zaidi, M. A. S. (2012). Fixed investment , household consumption , and economic growth : A structural vector error correction model ( SVECM ) study of Malaysia. International Journal of Business and Society, 13(1), 63–76.

Kasongwa, L., & Minja, E. (2022). Moderating Effects of Oil Price on the Impact of Macroeconomic Variables on Stock Market Performance. The Journal of the University of Dar Es Salaam Business School, 25(1), 75–89.

Khalid, W. (2017). Effects of Interest Rate and Exchange Rate on the Stock Market Performance of Pakistan : A Cointegration Approach. Journal of Finance and Economics, 5(5), 219–232. https://doi.org/10.12691/jfe-5-5-4

Khan, J., & Khan, I. (2018). The Impact of Macroeconomic Variables on Stock Prices : A Case Study of Karachi Stock Exchange. Journal of Economics and Sustainable Development, 9(13).

Kirikkaleli, D. (2020). The effect of domestic and foreign risks on an emerging stock market: A time series analysis. North American Journal of Economics and Finance, 51, 100876. https://doi.org/10.1016/j.najef.2018.11.005

Kuvshinov, D., & Zimmermann, K. (2022). The big bang : Stock market capitalization in the long run R. Journal of Finance Economics, 145, 527–552. https://doi.org/10.1016/j.jfineco.2021.09.008

Li, X., & Peng, L. (2017). US economic policy uncertainty and co-movements between Chinese and US stock markets. Economic Modelling, 61(November 2016), 27–39. https://doi.org/10.1016/j.econmod.2016.11.019

Liu, L. (2021). U . S . Economic Uncertainty Shocks and China ’ s Economic Activities : A Time-Varying Perspective. SAGE Open, 9. https://doi.org/10.1177/21582440211032672

Loecker, J. De, Eeckhout, J., & Unger, G. (2020). The rise market power and the macroeconomic implications. The Quarterly Journal Of Economics, 135(2), 561–644. https://doi.org/10.1093/qje/qjz041.Advance

Madyan, M., Adila, H., & Firdausi, N. A. (2019). Keterkaitan antar Bursa Efek Dunia (Studi Kasus Pada Bursa Efek Negara Maju dan Berkembang). Journal of Chemical Information and Modeling, 12(1), 85–97.

Magweva, R., & Sibanda, M. (2020). Inflation and infrastructure sector returns in emerging markets—panel ARDL approach. Cogent Economics and Finance, 8(1). https://doi.org/10.1080/23322039.2020.1730078

Majerova, I., & Prazak, T. (2020). The impact of crises on the relationship between stock market development and macroeconomic variables : evidence from Hong Kong and Singapore. Forum Scientiae Oeconomia, 8(4). https://doi.org/10.23762/FSO

Maulida, T. S. (2018). Pengaruh Harga Minyak Dunia, Nilai Tukar, Inflasi, Suku Bunga Sbi, Indeks Dow Jones, Dan Indeks Nikkei 225 Terhadap Indeks Sektor Pertambangan Yang Terdaftar Di Bursa Efek Indonesia (Bei) Periode 2011-2017. Jurnal Ilmu Manajemen (JIM), 6(3), 314–322.

Morema, K., & Bonga-bonga, L. (2020). The impact of oil and gold price fluctuations on the South African equity market : Volatility spillovers and financial policy implications. Resources Policy, 68(June), 101740. https://doi.org/10.1016/j.resourpol.2020.101740

Nti, I. K., Adekoya, A. F., & Weyori, B. A. (2019). Random Forest Based Feature Selection of Macroeconomic Variables for Stock Market Prediction. American Journal of Applied Sciences. https://doi.org/10.3844/ajassp.2019.200.212

Okoebor, S. E. (2022). Effects of macroeconomic variables on stock market performance in Nigeria : 1986 - 2020. African Journal of Social and Behavioural Sciences ( AJSBS ), 12(1), 49–70.

Onyebuchi, I., & Wasiu, A. B. (2020). Effect of inflationary expectations on stock market returns in Nigeria. Journal of Economic Studies.

Phuong, L. C. M. (2020). Institutions , microeconomic factors and stock market capitalization : Evidence from the EAP. Licensee Growing Science, Canada, 6, 817–824. https://doi.org/10.5267/j.ac.2020.6.001

Prasetyo, A. S. (2020). Peran Ketidak pastian Kebijakan Ekonomi dan Resiko Geopolitik Amerika Serikat Terhadap Indeks Harga Saham Gabungan. Sketsa Bisnis, 7(1), 56–71. https://jurnal.yudharta.ac.id/v2/index.php/SKETSABISNIS/indexhttps://jurnal.yudharta.ac.id/v2/index.php/SKETSABISNIS

Prasetyo, A. S., & Susandika, M. D. (2021). Analisis Respon Pertumbuhan Ekonomi Indonesia Akibat External. Journal Ekonomi Bisnis Dan Akuntansi, 8(1), 20–32.

Pujowati, Yenik, Hasibuhan, Putu, & Budino, S, T. (2022). Analysis of The Impact of Covid-19 on MSME Income In Nganjuk Regency. Jurnal Pamator, 15(1), 100-112

Rizqia, A., Astuty, P., & Subiyantoro, H. (2021). Impact of Macroeconomic Variables, American Stock Market Index and Covid-19 on Indonesia Capital Market Development (Time Series Study 1990-2000). Asian Institute of Research, 4(4), 1–11. https://doi.org/10.31014/aior.1992.04.04.388

Rosyidah, H., Rahmawati, R., & Prahutama, A. (2017). Pemodelan Vector Autoregressive X (Varx) Untuk Meramalkan Jumlah Uang Beredar Di Indonesia. Jurnal Gaussian, 6(3), 333–343. http://ejournal-s1.undip.ac.id/index.php/gaussian

Sousa, A. M. de, Noriller, R. M., Huppes, C. M., Lopes, A. C. V., & Meurer, R. malta. (2018). Relation between the macroeconomic variables and the stock return in companies of the finance and insurance sector from Latin American stock market. Revista Journal, 12(3), 20–30. https://doi.org/10.3232/GCG.2018.V12.N3.01

Sugiyono. (n.d.). Metode Penelitian Kuantitatif Kualitatif dan R&D.

Trabelsi, N., Gozgor, G., Tiwari, A. K., & Hammoudeh, S. (2021). Effects of Price of Gold on Bombay Stock Exchange Sectoral Indices: New Evidence for Portfolio Risk Management. Research in International Business and Finance, 55(June 2020), 101316. https://doi.org/10.1016/j.ribaf.2020.101316

Tursoy, T., & Faisal, F. (2018). The impact of gold and crude oil prices on stock market in Turkey: Empirical evidences from ARDL bounds test and combined cointegration. Resources Policy, 55(April), 49–54. https://doi.org/10.1016/j.resourpol.2017.10.014

Ullah, G. M. W., Islam, A., Alam, S., & Khan, K. (2017). Effect of macroeconomic variables on stock market performance of SAARC countries. Asian Economic and Financial Review, 7(8), 770–779. https://doi.org/10.18488/journal.aefr.2017.78.770.779

Utomo, S. H., Wulandari, D., Narmaditya, B. S., Handayati, P., & Ishak, S. (2019). Macroeconomic factors and LQ45 stock price index: Evidence from Indonesia. Investment Management and Financial Innovations, 16(3), 251–259. https://doi.org/10.21511/imfi.16(3).2019.23

Wang, R., & Li, L. (2020). Dynamic relationship between the stock market and macroeconomy in China ( 1995 – 2018 ): new evidence from the continuous wavelet analysis the continuous wavelet analysis. Economic Research-Ekonomska Istraživanja, 33(1), 521–539. https://doi.org/10.1080/1331677X.2020.1716264

Wirama, D. G., Wiksuana, I. G. B., Mohd-sanusi, Z., & Kazemian, S. (2017). Price Manipulation by Dissemination of Rumors : Evidence from the Indonesian Stock Market. International Journal of Economics and Financial, 7(1), 429–434.

Youssef, M., & Mokni, K. (2019). Do crude oil prices drive the relationship between stock markets of oil-importing and oil-exporting countries? Economies, 7(3). https://doi.org/10.3390/economies7030070

Yulianti, M. T., & Purwohandoko. (2019). Pengaruh Variabel Makroekonomi, Harga Komoditas & Indeks Saham Global Terhadap IHSG Periode 2014-2018. Jurnal Ilmu Manajemen (JIM), 7(3), 629–641.

Zaimovic, A., Omanovic, A., & Arnaut-Berilo, A. (2021). How Many Stocks Are Sufficient for Equity Portfolio Diversification? A Review of the Literature. Journal of Risk and Financial Management, 14(11), 551. https://doi.org/10.3390/jrfm14110551

DOI: https://doi.org/10.29259/jep.v21i1.20658

Refbacks

There are currently no refbacks.

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Jurnal Ekonomi Pembangunan
Jalan Raya Palembang-Prabumulih Km. 32
Jurusan Ekonomi Pembangunan, Fakultas Ekonomi Universitas Sriwijaya
Indralaya, Sumatera Selatan, Indonesia
Email: jep.unsri@gmail.com, Tel/Fax : (0711)580231

p-ISSN: 1829-5843, e-ISSN 2685-0788