Pengaruh Jangka Pendek dan Jangka Panjang Perubahan Suku Bunga dan Kurs Rupiah Terhadap Harga Saham : Studi Empiris di Indonesia (2000:1 – 2010:4)

The present study investigates the role of exchange rate and interest rate in stock price discovery in Indonesia. Indonesia is experiencing a kind of bubble which is indicated by surplus of current account accompanied by high capital inflow. Capital inflow simustaneusly influences exchange rate, and interest rate, and thus sequently affects stock prices. Employing cointegration approach and Engle Granger Error Corection Model (ECM), covering monthly time series data from January 2000 to April 2010, both short run and long run relationships are investigated. It is found out that there is cointegration relationship between stock price as dependent variable and exchange rate and interest rate, as independent variables. In the long run and in the short run, interest rate statisticaly significant negatively influences the stock prices. The impact of exchange rate on stock price is statistically significant, and changes in sign from negative in the short run effect to positive in the long run effect. In the long run, stock price is elastic to the changes in interest rate, and exchange rate. In the short run, the elasticity of stock price is decreasing in responding to the change in interest rate and exchange rate.Cointegration; ECM; stock price; economic model; exchange rate; interest rate

Macroeconomic adjustment, stabilization, and growth in reforming socialist economies : analytical and policy issues

Current attempts at reform in Eastern European countries raise important issues of macroeconomic management in the transition from central planning to a market or mixed economy. This paper develops simple models, reviews empirical evidence and discusses policy issues associated with traditional socialist economies and those undergoing reform. Those issues involve inflation, growth, money overhang, disequilibrium in goods and labour markets and interactions between stabilization and growth.Economic Theory&Research,Environmental Economics&Policies,Banks&Banking Reform,Economic Stabilization,Municipal Financial Management

How can Indonesia maintain creditworthiness and noninflationary growth ?

Despite external shocks, Indonesia has maintained creditworthiness through swift adjustment. Indonesia's flexible economic management and clear policy signals have lent stability to the economy, in contrast to the stop and go reforms, uncertainty, and constant debt renegotiations in many high debt countries. The authors use an econometrically estimated macroeconomic model to analyze open economy adjustment in Indonesia - particularly the interaction between the exchange rate, the interest rate, growth, and debt - and to analyze future policy changes in light of Indonesia's objectives for growth, external debt, and inflation.Economic Theory&Research,Environmental Economics&Policies,Macroeconomic Management,Economic Stabilization,Banks&Banking Reform

Macro-financial linkages and bank behaviour: evidence from the second-round effects of the global financial crisis on East Asia

This paper studies the link between macro-financial variability and bank behaviour, which justifies the second-round effects of the global financial crisis on East Asia. Following Gallego et al. (The impact of the global economic and financial crisis on Central Eastern and South Eastern Europe (CESEE) and Latin America, 2010), the second round effects are defined as the adverse feedback loop from the slumps in economic activities and sharp financial market deterioration, which may influence the financial performance of bank, inter alia via deteriorating credit quality, declining profitability and increasing problems in retaining necessary capitalization. Differentiating itself from other research, this study stresses adjustments in four dimensions of bank performance and behaviour: asset quality, profitability, capital adequacy, and lending behaviour, assuming that any change in a bank-specific characteristic is induced by endogenous adjustments of the others. The empirical results based on partial adjustment models and two-step system GMM estimation show that bank’s adjustment behaviour is subject to the variation in the macro-financial environment and the stress condition in the global financial market. There is no convincing evidence to support the effectiveness of policy rate cut to boots bank lending and to avoid a financial accelerator effect

What Caused the Asian Currency and Financial Crisis?

The paper explores the view that the Asian currency and financial crises in 1997 and 1998 reflected structural and policy distortions in the countries of the region, even though market overreaction and herding caused the plunge of exchange rates, asset prices and economic activity to be more severe than was warranted by the initial weak economic conditions. The first part of the paper provides an overview of economic fundamentals in Asia on the eve of the crisis, with emphasis on current account imbalances, quantity and quality of financial ‘overlending’, banking problems, and the composition, maturity and size of capital inflows. The second part of the paper presents a reconstruction of the Asian meltdown — from the antecedents in 1995-96 to the recent developments in the summer of 1998 — in parallel with a survey of the debate on the strategies to recover from the crisis, the role of international intervention, and the costs and benefits of capital controls.financial crisis, asia, currency

Macroeconomic Impacts of Immigration in Malaysia: Trade, Remittances and Unemployment

The macroeconomic consequence of immigration is a disputable area among many interested parties as evidenced by the empirical studies. Most studies, however, employ Anglo-Saxon countries as their subjects, while there is an increasing demand for studies on the economic consequences of immigration in developing countries. As a developing country, Malaysia has attracted immigration over the years, and the population of migrant labour in Malaysia has reached more than two million in 2008, which makes up 7% of the total population and 20% of total labour force. Thus, such large presence has provided a rationale for an economic analysis on the impact of immigrations on the Malaysian economy. This research, hence, aims to analyze the economic impact of immigration in Malaysia in the context of trade, remittance and unemployment in an interrelated manner. These topics are examined in detail in three separate empirical essays. Specifically, the first essay examines the link between bilateral trade and immigration, while the second essay explores the relationship between remittances of the Indonesian workers in Malaysia and the macroeconomic variables both in Malaysia and Indonesia. The last empirical essay analyses the relationship between unemployment and immigration in Malaysia. These empirical essays use quantitative research methodology in the form of panel and time series data analysis. However, each essay is based on a different theoretical framework, econometric methods, timelines and samples due to availability data and the nature of the study. The findings of the first essay indicates that immigration increases both exports and imports through both preference and immigration-link mechanisms, implying that immigrants play a vital role in fostering trade between Malaysia and countries of origin. In the second essay, it is found that Indonesian labour in Malaysia take macroeconomic conditions in both countries into account in their remittance decisions and the findings demonstrate that the main motives to remit is altruism and portfolio investment, indicating the importance of the level of economic activities in both countries. The third essay reveals that there is a lack of evidence supporting the hypothesis of adverse employment effect of immigration in Malaysia, implying that the job-creation effect of immigration has taken place, which has resulted in further economic and employment growth in both public and private sectors. In conclusion, immigration is vital for both host and home countries’ economic developments as the findings of this research have demonstrated, thus refuting the claims that their presence brings more harms than benefits

Balance Sheet Vulnerability and Macroeconomic Management in Indonesia

The economic and financial crises hitting Indonesia in 1997 have triggered a significant economic downturn. A critical issue addressed is how common shocks during crisis period have brought about macroeconomic outcome. The paper briefly discusses the problems, response and lessons learnt in the country’s effort to restore the economy to its long-term potential growth path. By examining balance sheet conditions across sectors in the economy, it is shown that even though some progress has been achieved, overall balance sheet conditions are still vulnerable to further shocks that may hit the economy, so that efforts to restore economic growth and stability face substantial challenges. Considering these constraints, Indonesian macroeconomic policy makers focus their efforts on strengthening financial markets, among others, by developing bond markets and implementing banking architecture. However, various constraints will remain unless the government speeds up the necessary reforms, mostly institutional in nature

Efficiency convergence properties of Indonesian banks 1992-2007

This paper examines the convergence properties of cost efficiency for Indonesian banks for the period 1992-2007. It employs the Simar and Wilson’s (2007) two stage semi-parametric double bootstrap DEA procedure to estimate cost efficiency. Using panel data estimation, the paper examines β-convergence and σ-convergence, to test the speed at which Indonesian banks are converging, towards the best practice and country average. We find evidence that in general the post-crisis structural reform process improved the average level of efficiency and improved the distribution of efficiency across banks significantly. The Asian financial crisis and the structural reform had the effect of slowing the adjustment speed of bank efficiency