Analysis of Oil Price Volatility and Stock Price Fluctuations in an Emerging Market: Evidence from Indonesia
Artha Widyatama Rama Davis, 14313363
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The study aims to examine the effects of oil price, inflation, exchange rate, interest rate, production index, oil production on stock price index in Indonesia in the period of 2000 – 2015. The empirical analysis commence by analyzing the time series property of data. The Johansen VAR-based co-integration technique was applied to examine the long run relationship between oil price, inflation, exchange rate, interest rate, production index, oil production and stock price index and found the long run relationship does exist. The vector error correction model was performed to check the short run dynamics and found that the short run dynamics are influenced by the estimated long run equilibrium. Granger causality was done and found that oil price affect stock price index. This research uses secondary data from BPS, Investing.com. Sample Data used is monthly data from January 2000 to December 2015. The result of the research shows that Inflation, Interest Rate, World Oil Price, Production Index and Oil Production give positive and significant impact in the long term and the Exchange rate shows Negative impact. While in the short term variable Stock, Inflation, Exchange rate, Interest rate, World Oil Price, Production Index, and Oil Production indicate Positive effect on first lag.
- Economics