Research Paper
Year: 2023 | Month: January | Volume: 10 | Issue: 1 | Pages: 284-303
DOI: https://doi.org/10.52403/ijrr.20230132
Analysis of Monetary Policy Mechanism Through Interest Rate Path to Stock Market (IHSG) in Indonesia
Rifqah Pratiwi Siregar1, Ahmad Albar Tanjung2, M. Syafii3
1Posgraduate Students, Faculty of Economics and Business, Department of Economics, Universitas Sumatera Utara, Indonesia
2,3Postgraduate Lecturer, Faculty of Economics and Business, Department of Economics, Universitas Sumatera Utara, Indonesia
Corresponding Author: Ahmad Albar Tanjung
ABSTRACT
This study aims to determine the effectiveness of the influence of the monetary policy mechanism through the interest rate channel on the stock market (IHSG) in Indonesia. In addition, this study aims to determine the strength of the variables contained in the interest rate channel in response to stock market conditions (IHSG) in Indonesia. This study uses the Vector Error Correction Model (VECM) regression model in estimating the influence of the monetary policy transmission mechanism through the interest rate channel on the stock market (IHSG) in Indonesia. The data used in this study is secondary data with monthly time series from 2015 to 2022. The secondary data used comes from annual reports that are officially published on the Bank Indonesia website. The research variables used to estimate the influence of the interest rate channel monetary policy transmission mechanism on the stock market (IHSG) are the BI rate, interbank money market interest rate (PUAB), deposit rate, Covid 19 and the composite stock price index. The results of this study indicate that the effectiveness of the monetary policy mechanism through the effective interest rate channel for the stock market (IHSG) in Indonesia. This effectiveness can be seen in the short and long term, the major changes in the JCI response were influenced by the impact of shocks from the interest rate channel. However, it should be noted that in the long run the Covid-19 conditions have a large influence on the JCI, followed by deposit rates. interest rates are in the shock of deposit rates which have an influence on the JCI.
Keywords: Monetary Policy Transmission Mechanism, JCI, Vector Error Correction Model (VECM).
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