Abstract
These research had purposed to examine related to macroeconomic variables on financial sector stock index in Indonesia Stock Exchange. This research used Vector Error Correction Model (VECM) method with monthly data from financial sector stock index as the dependent variable and the GDP quarterly data, as well as monthly data on inflation, BI interest rates, exchange rates, the Fed interest rate, gold prices, oil prices,and also the S&P 500 index as independent variable with data range from January 2014 to August 2019. These results that obtained from this research were the shocks in BI interest rate variable and the exchange rate which have positive responses in the long term, while the GDP, inflation, and Fed interest rates , gold prices, oil prices, and the S&P 500 index responded negatively in the long term by the financial sector stock index. Beside that, the BI interest rate variable has the greatest contribution in changed of financials stock index.
Highlights
Financial sector is the dominant sector which influencing Indonesia's macroeconomics because of its price shocks would have an impact to Indonesian economy generally
According to the results from unit root test using Augmented Dickey Fuller (ADF), it shows that all variables were not stationary at the level but Stationary at the first difference level, except for the interest rate of The Fed (SBTF)
After it was found that there has data that were instationary at the first difference level, each data stationarity was re-tested at the second difference level and it was found that whole variables were stationary
Summary
Financial sector is the dominant sector which influencing Indonesia's macroeconomics because of its price shocks would have an impact to Indonesian economy generally. Financial index volatility had significant impact on Indonesia's domestic macroeconomic volatility. According to Maulana, et al et al (2015) Global financial crisis that occurred in 2008 had quite negative impact on banking sector in Indonesia. Available Online: https://dinastipub.org/DIJEFA prices at that time was due to an increase in capital outflows from Indonesia, as reflected of declined on foreign ownership in SBIs, SUN and stocks in capital market, including banking stocks in Indonesia that reach the peaked on November 2008. Problems with banks' cash have caused banks to face liquidity problems which resulted in banks losing confidence and people were busy withdrawing their money on a large scale from banks (Bank Indonesia, 2010)
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