Abstract
This study is aimed to analyze the causal relationship between the exchange rates and Islamic indices in Indonesia and Malaysia, and the long-term relationship of the two variables. Indonesia is represented by the value of the rupiah to US dollar and the Jakarta Islamic Index while Malaysia is represented by the exchange rate of the ringgit to US dollar and the FTSE Bursa Malaysia Hijrah Shariah Index. By using the Vector Autoregression (VAR) model, it can be concluded that the relationship between Jakarta Islamic index is a unidirectional relationship, where the Jakarta Islamic Index affects the exchange rate. The relationship between Malaysia Islamic index has a bidirectional relationship, where the exchange rate affects the FTSE Bursa Malaysia ringgit Hijrah Shariah Index and FTSE Bursa Malaysia Hijrah Shariah Index affects the ringgit exchange rate. Through the study is also concluded that the exchange rate with Islamic indices in Indonesia and Malaysia has a long-term relationship. Keywords : Rupiah, Ringgit, Jakarta Islamic Index, the FTSE Bursa Malaysia Hijrah Shariah Index, VECM
Highlights
Islamic Finance for Asia, Prospected & Inclusives Growth, ADB per May 2015 states that the biggest assets of world Islamic capital markets are located in the region of Southeast Asia region for US $ 203.1 million.1 Indonesia and Malaysia are the two countries in the Southeast Asia region that have a fairly rapid Islamic stocks growth
The model of Indonesia's exchange rate to US dollar and the Indonesia sharia stock price index represented by rupiah (ERI) and the Jakarta Islamic Index (JII), and a model of Malaysia’s exchange rate (ERM) to the dollar AS and Malaysian stock price index represented by the FTSE Bursa Malaysia Hijrah Sharia Index (FBMHS)
This study found that the relationship between the exchange rate sharia share price index in Indonesia indicates a unidirectional relationship, that is the variable change Jakarta Islamic Index influences variable exchange rate; and variable changes in the exchange rate does not give effect to changes in the Jakarta Islamic Index
Summary
Islamic Finance for Asia, Prospected & Inclusives Growth, ADB per May 2015 states that the biggest assets of world Islamic capital markets are located in the region of Southeast Asia region for US $ 203.1 million. Indonesia and Malaysia are the two countries in the Southeast Asia region that have a fairly rapid Islamic stocks growth. In Indonesia, the number of Islamic stocks continues to grow, in June 2015 it reached 335 stocks with a market capitalization of Rp 3.011 trillion or 56.4% of the all shares capitalization.. Jakarta Islamic Index (JII) and the FTSE Bursa Malaysia Hijrah Shariah Index is one of the leading shares index in Indonesia and Malaysia respectively that meet the criteria of sharia and become a benchmark of shares investment performance on the basis of sharia in Indonesia and Malaysia.
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