Syarif, Muhammad Zulfan (2026) A COMPARATIVE ANALYSIS OF THE EFFECTS OF GDP, INFLATION, REER, AND RIR ON INDONESIA’S IHSG AND MALAYSIA’S KLCI USING THE ARDL-ECM APPROACH. Undergraduate thesis, UPN Veteran Jawa Timur.
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Abstract
This study aims to analyze and compare the effects of Gross Domestic Product, the Real Effective Exchange Rate, inflation, and real interest rates on Indonesia’s Composite Stock Price Index and Malaysia’s Kuala Lumpur Composite Index in both the long and short term. Indonesia and Malaysia were selected as subjects for comparison because they exhibit significant differences in structural characteristics, including variations in the degree of economic openness, historical macroeconomic volatility, and the maturity of their capital markets; thus, a comparative analysis of the two provides representative insights into the heterogeneity of transmission mechanisms within the ASEAN region. The theoretical framework used includes Fundamental Value Theory, the Interest Rate Channel of Monetary Policy Transmission, the Fisher Effect, and the Arbitrage Pricing Theory. The study employs a quantitative approach using the Autoregressive Distributed Lag (ADL) model and Bounds Testing for Cointegration on annual time-series data from 1994 to 2024, comprising 31 observations per country. The results confirm the existence of long-run cointegration between macroeconomic variables and stock indices in both countries. Gross Domestic Product (GDP) has a positive and significant effect on the IHSG with a long-run elasticity of 1.44 and on the KLCI with an elasticity of 0.87. Inflation has a positive and significant effect on the IHSG, whereas its effect on the KLCI is negative but not statistically significant, indicating differences in the strength of monetary policy transmission mechanisms between the two countries. The Real Effective Exchange Rate has a significant effect only on the KLCI, consistent with differences in the level of economic openness between the two countries. The IHSG’s faster adjustment speed compared to the KLCI reflects differences in the macroeconomic structural characteristics of the two countries, with Indonesia operating in a higher-volatility environment, resulting in a more aggressive corrective response. These findings have implications for investors in designing regional portfolio diversification strategies, as well as for policymakers in formulating more effective macroeconomic policies. Keywords: IHSG, KLCI, ARDL, Macroeconomics, ASEAN Capital Markets
| Item Type: | Thesis (Undergraduate) | ||||||||
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| Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HC Economics |
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| Divisions: | Faculty of Economic and Business > Departement of Economics | ||||||||
| Depositing User: | Muhammad Zulfan Syarif | ||||||||
| Date Deposited: | 06 Jul 2026 04:11 | ||||||||
| Last Modified: | 06 Jul 2026 04:11 | ||||||||
| URI: | https://repository.upnjatim.ac.id/id/eprint/54502 |
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