Impacts of US Monetary Policy, Domestic Micro and Macro Variables on the Indonesia Stock Market during Quantitative Easing Period in 2008-2020
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Abstract
This research is aimed to establish US (macro)as well as domestic (micro and macro)
determinants of the Indonesia stock market since the Federal Reserve started quantitative easing
(QE) policy in 2008 until end of 2020. Error Correction Model (ECM) is applied on models with
co-integrated variables and Vector Autoregression(VAR) in first differenceis applied on those
without co-integrated ones. This research finds that QE positively affects the Indonesia equity
market through the currency exchange rate. Another US macro determinant for the Indonesia
equity market is S&P 500 index. On local determinants, this research finds that Credit Default
Swaps (CDS) index and market volatility negatively affect the stock market, while Rupiah
exchange rate, stock market liquidity and valuation positively impact the Jakarta Composite
Index. To the author's knowledge, there has been no research on the influence of the CDS
index on stock markets in Indonesia since the QE policy was launched by the US central bank in
2008.
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