The Impact of U.S. and China Economic Policy Uncertainty on the Indonesian Stock Market: An Empirical Study on the JKSE with Inflation and Interest Rates as Control Variables

DOI

10.2991/978-94-6463-938-4_31How to use a DOI?

Keywords

Economic Policy Uncertainty; JKSE; Inflation; Interest Rate; VECM

Abstract

Global economic policy uncertainty, particularly from the United States and China, can influence the stability of stock markets in emerging economies such as Indonesia. This study aims to analyze the effect of Economic Policy Uncertainty (EPU) from the U.S. and China on fluctuations in the Indonesia Composite Index (JKSE), while considering inflation and interest rates as control variables. The research utilizes annual time series secondary data from 2006 to May 2025, sourced from the official websites of IDX, Bank Indonesia, Statistics Indonesia (BPS), and policyuncertainty.com. The analytical method employed is the Vector Error Correction Model (VECM). The results show that in the long term, EPU US and interest rates have a significant positive effect on the JKSE, while EPU China and inflation have a significant negative effect. In the short term, only EPU China has a significant impact on the JKSE. The Granger causality test reveals a bidirectional relationship between EPU China and JKSE, and a unidirectional relationship from JKSE to EPU US. This study contributes to a deeper understanding of the relationship between global economic policy uncertainty and domestic stock market dynamics, and offers recommendations for investors and policymakers to consider both global and domestic factors in decision-making.

Copyright

© 2025 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Angga Hergastyasmawan
AU  - Fitri Wulandari
AU  - Muhammad Khozin Ahyar
AU  - Ellen DOktanti Irianto
AU  - Ghina Salsabila
AU  - Uni Sakila
PY  - 2025
DA  - 2025/12/31
TI  - The Impact of U.S. and China Economic Policy Uncertainty on the Indonesian Stock Market: An Empirical Study on the JKSE with Inflation and Interest Rates as Control Variables
BT  - Proceedings of the International Conference on Applied Science and Technology on Social Science 2025 (iCAST-SS 2025
PB  - Atlantis Press
SP  - 257
EP  - 264
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-938-4_31
DO  - 10.2991/978-94-6463-938-4_31
ID  - Hergastyasmawan2025
ER  -