DYNAMICS OF THE COMPOSITE STOCK PRICE INDEX, INTEREST RATES, AND EXCHANGE RATES AMID GLOBAL VOLATILITY (2021–2025)
Abstract
This study analyzes the dynamics of the relationship between the Jakarta Composite Index (JCI), the benchmark interest rate (BI-7DRR), and the rupiah exchange rate (IDR/USD) with global volatility (VIX), the US stock market (S&P 500), and world gold prices in the period January 2021– December 2025. Using the Vector Autoregression (VAR)/Vector Error Correction Model (VECM) approach with monthly data , this study applies the Johansen cointegration test , Impulse Response Function (IRF), and Forecast Error Variance Decomposition (FEVD). The results of the study found six cointegration vectors that confirmed a strong long -term equilibrium relationship between all variables . The IRF analysis shows that a positive shock to the VIX produces a persistent negative response to the JCI ( reaching -58.60 in the 10th period ), while the shock to the S&P 500 produces a positive response that continues to strengthen (101.39 in the 10th period ). An interesting finding shows that positive shocks to gold prices and the BI-7DRR actually generate a positive response to the JCI, contrary to conventional theoretical predictions . Exchange rate depreciation generates a persistent negative response to the JCI. The FEVD results reveal that the JCI's own-shock contributes 84.10% to its variation , followed by the S&P 500 (8.91%), gold prices ( 8.92%), and the JCI's own-shock (8.91%). (4.57% ) , VIX (1.65%), exchange rate (0.50%), and BI-7DRR (0.27%). Global factors collectively contributed 15.13% to the JCI's fluctuations , far exceeding domestic policy variables (0.77%), confirming that the Indonesian capital market in the post-pandemic period was largely driven by the dynamics of the global financial cycle .
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