US government shutdowns and Indonesian stock market

Abstract

Using a dataset ranging from 1983 to 2018, we examine the effect of US government shutdowns on Indonesian stock index excess returns. Our analysis shows that these shutdowns exert positive effects on Indonesian stock market index excess returns, and these effects take place only on one day. Furthermore, we show that the effects of US government shutdowns are heterogenous at industry and firm levels. Our main analysis survives a range of robustness tests, including controlling for financial crises, controlling for day-of-the-week effect and using alternative stock return measures.