The Effect of Monetary Policy On MacroEconomic Stability And Stock Market : Evidence From Indonesia

Praptiningsih, Maria (2001) The Effect of Monetary Policy On MacroEconomic Stability And Stock Market : Evidence From Indonesia. AU Journal of Management, 9 (1). pp. 13-22. ISSN 1686-0039

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Abstract

Monetary policy can have a significant effect on the movement in the stock market. This paper investigates the effect of monetary policy through monetary instruments on macroeconomic objectives and stock market utilizing Vector Error Correction Model (VECM) in order to examine the dynamic effect of Bank Indonesia Rate and Overnight Money Market Rate in achieving price stability. Foreign exchange stability, economic growth, and capital market stability. This paper utilizes Impulse Responses and Variance Decomposition approach to examine the responses and the contribution of monetary policy instruments in affecting the macroeconomic objectives. The finding confirmed that Bank Indonesia Rate and Overnight Money Market Rate are statistically significant in affecting the inflation rate, foreign exchange rate, the output growth and the Jakarta Composite Index. Finally, there is a trade-off between inflation and economic growth.

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• The Effect of Monetary Policy On MacroEconomic Stability And Stock Market : Evidence From Indonesia. (deposited 22 Feb 2013 14:36)[Currently Displayed]
  • The Effect of Monetary Policy On MacroEconomic Stability And Stock Market : Evidence From Indonesia. (deposited 03 May 2013 14:08)

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