Volatility Transmission between Exchange Rates and Stock Prices in Indonesia post 1997 Asia Crisis

Anhar Priyono () and Arief Bustaman ()
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Arief Bustaman: Department of Economics, Padjadjaran University

No 201404, Working Papers in Economics and Development Studies (WoPEDS) from Department of Economics, Padjadjaran University

Abstract: Volatility of Indonesia Rupiah and Jakarta Composite Index remain one of main issues in Indonesia economy after 1997 Asian crisis. The objectives of this research are (1) determining the volatility of Indonesia Rupiah to US Dollar exchange rates and Jakarta Composite Index (JCI) and (2) analysing the dynamic volatility transmission between exchange rates and JCI. Exchange rate and JCI volatility were measured using GJR-GARCH approach. Estimated using VAR model, this study found that current volatility of exchange rate (ER) respond significantly to the change of volatility of Jakarta Composite Index (JCI) in the previous month. On the other hand, change in previous exchange rate volatility did not affect current JCI volatility.

Keywords: Indonesia financial market; volatility; GJR-GARCH; VAR (search for similar items in EconPapers)
JEL-codes: G0 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2014-02, Revised 2014-02
New Economics Papers: this item is included in nep-sea
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