CROSS BORDER PORTFOLIO INVESTMENT AND THE VOLATILITY OF STOCK MARKET INDEX AND RUPIAH’S RATE

Al Muntasir ()
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Al Muntasir: University of Gadjah Mada

Bulletin of Monetary Economics and Banking, 2015, vol. 17, issue 4, 403-432

Abstract: This paper use daily data during the period 2010-2014 to analyse the impact of foreign capital inflows on capital market volatility and on the volatility of Rupiah’s rate. The results shows the flow of foreign capital positively affect the Jakarta Composite Index (JCI) but not the rate of Rupiah. Using Vector Error Correction Model, this paper finds a cointegrated and dynamic relationship between the changes in foreign capital flow in Indonesia, with the JCI and the exchange rate of Rupiah against USD. Changes in the Rupiah’s rate significantly affect the foreign capital flow and the JCI, while the JCI does not significantly affect the flow of foreign capital and the changes of Rupiah’s rate.

Keywords: Foreign Capital Flows; Capital Market of Volatility; Currency Exchange (search for similar items in EconPapers)
JEL-codes: F33 G10 G12 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:idn:journl:v:17:y:2015:i:4b:p:403-432

DOI: 10.21098/bemp.v17i4.504

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