Vector Autoregressive (VAR) Model of Dynamic Linkage between Stock Indices and Rupiah's Exchange Rate : Application to Composite and Sectoral Indices on Jakarta Stock Exchange in 1990-2001 (In Indonesian)

This study examines dynamic linkage between stock indices (e.g. composite and sectoral indices on the Jakarta Stock Exchange) and Rupiah's exchange rate at three different time periods. Granger causality testing technique is used, based on VAR model id data have no integration relationship and VEC model If they do. The results show different direction of causality at different time periods. Jakarta Composite Index and Rupiah show no causality relationship at pre-crisis period, but show unidirectional and feedback causality at crisis and recovery period, respectively. This difference also happens on sectoral indices. However, portfolio approach is more dominant than traditional approach at crisis and recovery period but no at pre-crisis period. Feedback causality that does not happen at pre-crisis is dominant together with portfolio approach at crisis and recovery period