VAR Analysis on Mutual Relationship between Stock Price Index and Exchange Rate and the Role of World Oil Price and World GoldPrice
Filus Raraga and Harjum
Muharam
Faculty of Economics and
Business Diponegoro University
ABSTRACT
This study
aims to analyze the influence of world oil price and world gold price on mutual
relations between exchange rate and stock price index. This study uses monthly
data of exchange rate (IDR/US$) and JCI from January 2000 to January 2013. Co
integration test was used in analyzing long-term relationships between
variables. VAR model was used in determining whether world oil prices and world
gold price affect the exchange rate and stock index, and analyze the
interrelationships between exchange rate and stock price index. Impulse
Response Analysis is used to determine the response of exchange rate and the
stock price index on world oil price shocks and world gold price shocks.
Analysis of Variance Decomposition is used to determine the role of world oil
prices and world gold prices in explaining the movement of exchange rate and JCI.
Co integration analysis results show that all the variables, ie, world oil
prices, gold prices, exchange rates and JCI have long run co integration. The
analysis showed that the world oil price has significant effect on the exchange
rate but has no effect on JCI; the world gold price has no effect on
exchange rate and JCI; exchange rate has significant effect on JCI and vice
versa. Granger causality test showed that JCI and exchange rate have
bidirectional relationship. Impulse Response Analysis results indicate that the
world oil price shocks responded negatively by exchange rate; shocks in world
gold prices responded negatively by JCI and exchange rate; exchange rate
changes responded positively by JCI, and JCI changes responded positively by
exchange rate.
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