Title : Impact of Monetary Policy on LQ45 Stock Returns in Indonesia: Markov Switching Autoregressive (MS-AR) Approach
Author: Bekti Setyorani
Universitas Airlangga
Item Type : Thesis (Thesis)
Abstract
This research aims to analyze the impact of monetary policy on LQ45 stock returns in Indonesia. The data used in this thesis covers the period January 2000 to December 2019. This thesis uses the Markov Switching Autoregressive (MS-AR) method to analyze different stock return periods. This thesis uses two monetary policies, namely domestic monetary policy and foreign monetary policy. The domestic monetary policy instruments used are growth in the money supply and Indonesian banking interest rates, while the foreign monetary policy instruments used are banking interest rates in the United States, Europe, China and Japan. Based on empirical results, the appropriate model to determine the condition of LQ45 stock returns in Indonesia is the Markov-Switching Model rather than the Linear Model. The impact of monetary policy through growth in the money supply and Indonesian PUAB interest rates on LQ45 stock returns is asymmetric and is greater during the bull market period. The growth in the money supply during the bull market period showed a negative impact on LQ45 stock returns as a result of high inflation in Indonesia. Changes in Indonesian banking interest rates (PUAB) on LQ45 stock returns have a positive and greater impact during the bull market period. This is caused by the exchange rate strengthening during the bull market period. The impact of foreign monetary policy through PUAB interest rates in the United States, Europe, China and Japan shows that there is an asymmetric impact on LQ45 stock returns. The impact of foreign monetary policy on LQ45 stock returns was greater during the bull market period. China's foreign monetary policy has the largest impact on LQ45 stock returns in Indonesia as a result of trade transmission. The policies implemented by the Central Bank of China (PBOC) will affect Chinese companies which in turn will affect companies in Indonesia through global supply chains.
Keywords: Monetary Policy, Asymmetric, Bull, Bear, Markov-Switching
