This study focuses on Indonesia stock market among the ASEAN; this paper presents the analysis of Indonesia stock market composite index (IDX) and macroeconomic indicators of Indonesia. The macroeconomic indicators utilised in this study are exchange rate denoted as IEXR, gross domestic products (IGDP), inflation (IINFR) and real interest rate (IRIR). The sample period examined in this study spans from 1988 to 2019. The data analysis includes stationary and cointegration test, models with three ways of testing of VECM (Error Correction t-test, Granger causality test and VECM. The findings reveal both long- and short-run cointegration between IDX and the independent variables mentioned above. IINFR and IRIR are found positively Granger cause IDX, suggesting their influence on stock market composite index performance over time. The results also show that all four macroeconomic factors have positive impacts on Indonesia stock market composite index (IDX). These key insights highlight importance of microeconomic factors for investors when considering investing into Indonesian stocks or other related financial products within the region.
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