Economic fluctuations and monetary policy on the stock market during the COVID-19 pandemic in Indonesia

Suriani Suriani,Muhammad Nasir,Ernawati Ernawati,A Rahman,E Mas,I Rusydy,Muksin Muksin,H.A Haridhi,E Meilianda,A Suppasri,Y Idris,T Musa,A Opdyke

doi:10.1051/e3sconf/202234005005

Abstract

The purpose of this study is to examine the stock market’s resiliency in the face of economic fluctuations and a crisis caused by the COVID-19 outbreak. using monthly data from 2011 to 2020 and an error correction model with the Composite Stock Price Index (conventional stock market system) and the Jakarta Islamic Index (Islamic stock market system) as dependent variables and policy interest rates, exchange rates, inflation, and crises as independent variables. In both stock market models, the regression results reveal that there is a short-term to long-term equilibrium relationship. Interest rates set by policymakers and crisis variables have a detrimental impact. In the long run, the exchange rate has a beneficial effect, and inflation has no influence on the two stock markets. In the short run, the findings in both markets are nearly identical, meaning that inflation and policy interest rates have little influence, whereas exchange rates have a negative impact. The crisis, on the other hand, had no impact on the JCI stock market. The crisis had a positive impact on the JII stock market, unlike the JII stock market. These findings are significant because they reveal a distinction that leads to a significant increase in the number of investors who believe it is safe to invest in the Islamic stock market in the short term, notwithstanding the crisis.

Highlights

Every developing country desires sustained economic growth conditions
It can be stated from the state of gross domestic product (GDP), which has decreased, or it can demonstrate that real economic growth has been negative for two consecutive quarters or for more than a year
This study focuses on economics, with the variables studied being economic growth and macroeconomic variables, as well as the study of Indonesian monetary policy

Summary

Introduction

Every developing country desires sustained economic growth conditions. In the event of an unavoidable recession caused by an economic crisis, optimal preparation and strategy are required to resolve the problem. A recession is an economic condition characterized by a decline and sluggishness in aggregate economic activity. It can be stated from the state of gross domestic product (GDP), which has decreased, or it can demonstrate that real economic growth has been negative for two consecutive quarters or for more than a year. Prolonged recessions can lead to economic depression and volatile price levels. According to reference [1], significant internal and external shocks can cause the occurrence of an economic recession, i.e. fluctuations in output (1)

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