Macroeconomic Variables and Capital Market Performance: Evidence in Asia Pacific Region

Abstract

The capital market is a very important part of the national economy. The capital market, which has an increasing trend, identifies that economic conditions in the country are also improving. The capital market conditions in Asia Pacific countries during the last few years experienced an unstable growth trend. In fact, some capital markets have experienced slowing growth. The samples in this study are BSESN, N225, SSEC, HIS, AORD, JKSE and STI during the period 2010 to 2017. The variable used is the performance of the capital market as the dependent variable. Inflation, interest rates, exchange rates, and foreign direct investment as independent variables that represent the state's financial stability and stock price variables in the United States as independent variables representing the world's largest capital market. The data analysis used was panel data analysis consisting of Pooled Least Square, Fixed Effect, and Random Effect, while the selection of the best model used the chow test, lagrange multiplier (LM) test, and hausman test. The results of the analysis show that inflation, interest rates, and foreign direct investment have a negative and significant impact on the performance of capital markets in Asia Pacific countries. Exchange rates have a negative and insignificant impact on the performance of the capital market. The share price at DJIA has a positive and insignificant impact on the performance of capital markets in Asia Pacific countries. Based on these findings, the most appropriate steps that can be taken to improve the performance of the capital market are to maintain conditions of inflation, interest rates, and foreign direct investment so that they are stable and not too high.