Analysis of the Influence of Inflation Fluctuations, BI Rate, Money Supply, and Exchange Rate on the Composite Stock Price Index of the Indonesian Stock Exchange in the Period 2014-2019

Abstract

Economic growth is one of the indicators of successful development in an economy. One indicator of economic growth is the stock market. The stock market is a place where people with excess funds (investors) meet companies that need funds (issuers). The purpose of this research is: 1) To determine whether the inflation variable has a significant influence on the Composite Stock Price Index in 2014-2019. 2) To determine whether the BI Rate variable has a significant influence on the Composite Stock Price Index in 2014-2019. 3) To determine whether the Money Supply variable has an influence on the Composite Stock Price Index in 2014-2019. 4) To determine whether the exchange rate variable has a significant influence on the Composite Stock Price Index in 2014-2019. 5) To describe the magnitude of the shock generated by the variables of inflation, BI Rate, Money Supply, and exchange rate on the Composite Stock Price Index in 2014-2019. To identify these issues, this study is a quantitative research and uses the Vector Error Correction Model (VECM) method to examine short-term relationships and employ cointegration tests to identify indications of long-term relationships. Based on the research results, it can be concluded that: 1) Based on the short-term VECM test, the estimated inflation variable has a positive but insignificant effect. Then, the long-term estimation results show that the inflation variable has a negative but insignificant effect on the IHSG variable. 2) The short-term estimation results for the BI Rate variable have a negative but insignificant effect on the IHSG. Then, the long-term estimation results show that the BI Rate variable has a negative but insignificant effect on the IHSG variable. 3) The Money Supply variable has a significant negative effect on the IHSG in the short term. The long-term estimation results show that the Jumlah Uang Beredar variable has a significant negative effect on the IHSG. 4) The short-term estimation results for the nilai tukar variable have a positive but insignificant effect on the IHSG. Then, the long-term estimation results show that the nilai tukar variable has a positive and significant effect on the IHSG. 5) Based on the IRF test to determine shocks on each variable, the BI Rate variable shows a tendency for thin shocks above the horizontal line, indicating that the BI Rate variable has a permanent positive impact.