How Is the Effect of Inflation to Interest Rate, Exchange Rate and Indonesia Composite Index?

Abstract

This study seeks to test the macroeconomy on the Composite Stock Price Index (CSPI). The modeling of this study uses several macroeconomic related factors, which includes inflation, interest rates, and exchange rates.This research was conducted in Indonesia in the observation period 2014 to 2017 (48 observation data). The data used are secondary data collected through the internet. The data are processed using PLS with path analysis. The results of the study show that only inflation has an effect on interest rates and exchange rates against the CSPI. This shows that amongst the government policies which control the macroeconomy, only the exchange rates affect the CSPI.The novelty of this study is that researches on the testing of the form of mediation for inflation, interest rate and exchange rates for the JCI are still limited, so this one can be used as a reference in testing mediation effects.

Keywords: inflation, interest rates, exchange rates and CSPI

DOI: 10.7176/RJFA/10-10-08

Publication date:May 31^st 2019