Monday, September 24, 2012

Interdependence Between Islamic Capital Market and Islamic Money Market: Evidence from Indonesia *)

Gandhi Anwar Sania and Imam Wahyudib
a,b Department of Management, Faculty of Economic, University of Indonesia


This study investigate VAR Toda-Yamamoto causality test between macroeconomic variables and Islamic financial market. The purpose of this study is analyzing the information content of Islamic capital market and Islamic money market return with respect to several macro economic indicators.

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 interest rate (SBI) significantly affected JII. Otherwise, none of the macroeconomic variables found to significantly affect SBIS. Using multivariate method, SBIS has more content information (i.e SBI, industry production index, and inflation rate) than JII (i.e exchange rate). 

Contradiction in these findings indicate the presence of (i) interaction between the macroeconomic variables, (ii) interaction between the financial market and the macroeconomic variables, and (iii) interaction between the Islamic capital market and the Islamic money market. Further, by considering these interactions, SBIS tends to have more information content than JII and more suitable for use as a barometer of monetary policies in Indonesia.

Key words: Islamic finance, capital market, money market, monetary, causality.

Presented at:
  • The 15th Malaysian Finance Association Conference, Sime Darby Convention Center, Kuala Lumpur - Malaysia, June 2 to 4 2013.
  • The 9th International Conference on Islamic Economics and Finance, WOW Convention Center, Istanbul - Turkey, September 9 to 10 2013. 
  • Also accepted to be presented in 7th International Conference on Business and Management Research 2012 at Economics University Ho Chi Minh, Vietnam.
Full paper is available on both Bahasa Indonesia and English

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