The Effect Of Economic Crisis Indicators On The Performance Of Conventional And Islamic Capital Markets In Indonesia; A Comparative Analysis

Abstract

The objective of this research is to analyze the different effects of economic crisis indicators on the performance of conventional and Islamic capital markets in Indonesia and the stability of both capital markets during shocks using Vector Error Correction Model (VECM). Monthly time-series data from 2015 to 2019 were used, the variables are inflation, interest rate, SIBOR, developed countries’ economic growth, foreign exchange reserves, and world oil prices. This study finds that, in the long run, inflation affects the performance of the capital markets and that the economic growth of developed countries influences conventional capital markets. In the short run, foreign exchange reserves influence both capital markets, and the economic growth of developed countries affects Islamic capital market. Significant differences in stability due to shocks were not found in both markets if observed using IRF test and variance decomposition. If later on shocks in economic crisis indicators that can refer to the occurrence of crises were to be found, the stability of both capital markets would be affected.