Interdependence between Islamic Capital Market and Money Market: Evidence from Indonesia

Borsa Istanbul Review, Volume 14, Issue 1, March 2014, Pages 32-47

16 Pages Posted: 5 Nov 2014 Last revised: 16 Nov 2015

See all articles by Imam Wahyudi

Imam Wahyudi

University of Indonesia (UI) - Department of Management, Faculty of Economics and Business, University of Indonesia

Gandhi Anwar Sani

Ministry of Finance - Indonesia

Date Written: March 1, 2014

Abstract

This study investigate VAR Toda-Yamamoto causality test between macroeconomic variables and Islamic financial market. The purpose of this study is to analyze the information content of Islamic capital market and money market return with respect to macroeconomic and global factors. Using bivariate method, we found that Islamic capital market index (JII) has more content information than Islamic money market index (SBIS). The exchange rate and VIX index significantly affected JII. Otherwise, only VIX index have been found to significantly affect SBIS. Using multivariate method, JII has more content information (exchange rate, world oil price, China’s economic growth, and VIX index) than SBIS (SBI rate, inflation rate, and VIX index). Contradiction in these findings indicates the presence of (i) interaction between the macro-economic variables, (ii) interaction between the financial market and the macroeconomic variables, and (iii) interaction between the Islamic capital market and money market. Further, by considering these interactions, JII more suitable for use as a barometer of fiscal policies in Indonesia, while SBIS suitable for monetary policies.

Keywords: Islamic finance, Capital market, Money market, Monetary, Causality

JEL Classification: E44, E63, F36, G15

Suggested Citation

Wahyudi, Imam and Sani, Gandhi Anwar, Interdependence between Islamic Capital Market and Money Market: Evidence from Indonesia (March 1, 2014). Borsa Istanbul Review, Volume 14, Issue 1, March 2014, Pages 32-47, Available at SSRN: https://ssrn.com/abstract=2518999

Imam Wahyudi (Contact Author)

University of Indonesia (UI) - Department of Management, Faculty of Economics and Business, University of Indonesia ( email )

Jl. Prof. Dr. Sumitro Djojohadikusumo,
Kampus UI Depok
Depok, West Java 16424
Indonesia
+62217272425 (Phone)
+62217863556 (Fax)

HOME PAGE: http://staff.ui.ac.id

Gandhi Anwar Sani

Ministry of Finance - Indonesia ( email )

Gedung Djuanda I Lantai 12
l. Dr.Wahidin Raya Nomor 1
Jakarta, 10710
Indonesia

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