Stock Price, Trade Balance, and GDP: Interrelationships (Evidence from Indonesian Stock Exchange 2005- 2020)

Setya Ayu Rahmawati; Satia Nur Maharani

doi:10.32535/ijafap.v6i2.1974

Stock Price, Trade Balance, and GDP: Interrelationships (Evidence from Indonesian Stock Exchange 2005- 2020)

Setya Ayu Rahmawati, Satia Nur Maharani

Abstract

This research’s focus are on the interrelationships between the three variables, namely the stock price, trade balance and GDP. Using 240 data quarterly between 2005-2020 using VECM Analysis. The results obtained show that in Indonesia Stock Exchange (IDX) there is no significant effect between the combined stock price and TB and vice versa. There is no significant two-way effect between stock prices and GDP. There was a significant influence between GDP on trade balance but not vice versa. The results of this study can enrich research in the field of macroeconomics and finance and can practically be a reference for observers for the Indonesian stock market.

Keywords

GDP; Trade Balance; IDX; Stock Market; VECM

Full Text:

PDF

References

Adjasi, C., Harvey, S. K., & Agyapong, D. A. (2008). Effect of exchange rate volatility on the Ghana stock exchange. African journal of accounting, economics, finance and banking research, 3(3).

Aguiar, M., & Gopinath, G. (2007). Emerging market business cycles: The cycle is the trend. Journal of political Economy, 115(1), 69-102. doi:10.1086/511283

Alexius, A., & Sp ?ang, D. (2018). Stock prices and GDP in the long run. Journal of Applied Finance and Banking, 8(4), 107-126.

Antonakakis, N., Gupta, R., & Tiwari, A. K. (2018). Time-varying correlations between trade balance and stock prices in the United States over the period 1792 to 2013. Journal of Economics and Finance, 42(4), 795–806. doi:10.1007/s12197-018-9428-z

Amiri, A., & Gerdtham, U. G. (2011). Relationship between exports, imports, and economic growth in France: evidence from cointegration analysis and Granger causality with using geostatistical models. Retrieved from https://mpra.ub.uni-muenchen.de/34190/

Astuti, P. B., & Mahardhika, A. S. (2020). COVID-19: How does it impact to the Indonesian economy?. Jurnal Inovasi Ekonomi, 5(2), 85-92. doi:10.22219/jiko.v5i02.11751

Baharumshah, A. Z. (2001). The effect of exchange rate on bilateral trade balance: new evidence from Malaysia and Thailand. Asian Economic Journal, 15(3), 291-312. doi:10.1111/1467-8381.00135

Balvers, R. J., Cosimano, T. F., & McDonald, B. (1990). Predicting stock returns in an efficient market. The Journal of Finance, 45(4), 1109-1128. doi:10.1111/j.1540-6261.1990.tb02429.x

Barakat, M. R., Elgazzar, S. H., & Hanafy, K. M. (2016). Impact of macroeconomic variables on stock markets: Evidence from emerging markets. International journal of economics and finance, 8(1), 195-207.

Beaudry, P., & Portier, F. (2014). News-driven business cycles: Insights and challenges. Journal of Economic Literature, 52(4), 993-1074. doi:10.1257/jel.52.4.993

Bilson, C. M., Brailsford, T. J., & Hooper, V. J. (2001). Selecting macroeconomic variables as explanatory factors of emerging stock market returns. Pacific-Basin Finance Journal, 9(4), 401-426. doi:10.1016/S0927-538X(01)00020-8

bi.go.id(2020), GDP 2005-2019. March 25th 2020. https://www.bi.go.id/id/pencarian/Default.aspx?k=gdp

Bodie, Z., Kane, A., & Marcus, A. J. (2018). Investments (11th ed.). New York: McGrawHill Education.

Boz, E., Daude, C., & Durdu, C. B. (2011). Emerging market business cycles: Learning about the trend. Journal of Monetary Economics, 58(6-8), 616-631. doi:10.1016/j.jmoneco.2011.11.003

Campbell, J. Y., & Shiller, R. J. (1987). Cointegration and tests of present value models. Journal of political economy, 95(5), 1062-1088. doi:10.1086/261502

Canto, V. A. (2018). Economic disturbances and equilibrium in an integrated global economy: Investment insights and policy analysis. Cambridge: Academic Press.

Celebi, K., & Hönig, M. (2019). The impact of macroeconomic factors on the German stock market: Evidence for the crisis, pre-and post-crisis periods. International Journal of Financial Studies, 7(2), 1-13. doi:10.3390/ijfs7020018

Desfiandi, A., Desfiandi, A., & Hapzi, A. L. ?. (2017). Composite Stock Price Index (IHSG) Macro Factor in Investment in Stock (Equity Funds). International Journal of Economics and Financial Issues, 7(3), 534-536.

Eita, J. H. (2012). Modelling macroeconomic determinants of stock market prices: Evidence from Namibia. Journal of Applied Business Research (JABR), 28(5), 871-884. doi:10.19030/jabr.v28i5.7230

Engle, R. F., & Granger, C. W. (1987). Co-integration and error correction: representation, estimation, and testing. Econometrica: journal of the Econometric Society, 251-276. doi:10.2307/1913236

Ezeoha, A., Ebele, O., & Ndi Okereke, O. (2009). Stock market development and private investment growth in Nigeria. Journal of sustainable development in Africa, 11(2), 20-35.

Fama, E. F. (1981). Stock returns, real activity, inflation, and money. The American economic review, 71(4), 545-565.

Feinberg, M., & Tokic, D. (2004). ITC investment, GDP and stock market values in Asia-Pacific NIC and developing countries: Some preliminary results. Journal of the Asia Pacific Economy, 9(1), 70–84. doi:10.1080/13547860310001628302

Florackis, C., Giorgioni, G., Kostakis, A., & Milas, C. (2014). On stock market illiquidity and real-time GDP growth. Journal of International Money and Finance, 44, 210–229. doi:10.1016/j.jimonfin.2014.02.006

Forson, J. A., & Janrattanagul, J. (2014). Selected macroeconomic variables and stock market movements: Empirical evidence from Thailand. Contemporary economics, 8(2), 154-174.

Franses, P. H., & Mees, H. (2011). Does news on real chinese GDP growth impact stock markets? Applied Financial Economics, 21(1), 61–66. doi:10.1080/09603107.2011.523190

Fratzscher, M., & Straub, R. (2013). Asset prices, news shocks, and the trade balance. Journal of Money, Credit and Banking, 45(7), 1211–1251. doi:10.1111/jmcb.12050

Funashima, Y., Iizuka, N., & Ohtsuka, Y. (2020). GDP announcements and stock prices. Journal of Economics and Business, 108. doi:10.1016/j.jeconbus.2019.105872

Gonzalo, J., Lee, T.-H., & Yang, W. (2008). Permanent and transitory components of GDP and stock prices: further analysis. Macroeconomics and Finance in Emerging Market Economies, 1(1), 105–120. doi:10.1080/17520840701864955

Granger, C. W. (1969). Investigating causal relations by econometric models and cross-spectral methods. Econometrica: journal of the Econometric Society, 424-438. https://doi.org/10.2307/1912791

Hsueh, S. J., Tsao, Y. C., Tu, C. H., Chiu, Y. H., & Liu, S. B. (2014). Can M&A activities act as a predictor of the performance of economic growth or stock prices? Economic Modelling, 42, 430–438. doi:10.1016/j.econmod.2014.07.028

Huy, D. T. N., Dat, P. M., & Anh, P. T. (2020). Building an econometric model of selected factors’impact on stock price: A case study. Journal of Security & Sustainability Issues, 9(5), 77-93. doi:10.9770/jssi.2020.9.M(7)

Idx.co.id (2020). Informasi saham. Retrieved from https://www.idx.co.id

Kohli, U. (2004). Real GDP, real domestic income, and terms-of-trade changes. Journal of International Economics, 62(1), 83-106. doi:10.1016/j.jinteco.2003.07.002

Marcellino, M., Stock, J. H., & Watson, M. W. (2003). Macroeconomic forecasting in the euro area: Country specific versus area-wide information. European Economic Review, 47(1), 1-18. doi:10.1016/S0014-2921(02)00206-4

Mehrara, M. (2007). The relationship between stock market and macroeconomic variables: A case study for Iran. Iranian Economic Review, 12(18), 51-62.

Michaely, M. (1977). Exports and growth: an empirical investigation. Journal of development economics, 4(1), 49-53. doi:10.1016/0304-3878(77)90006-2

Modis, T. (2007). Sunspots, GDP and the stock market. Technological Forecasting and Social Change, 74(8), 1508–1514. doi:10.1016/j.techfore.2007.07.001

Montiel, P. J. (2011). Macroeconomics in emerging markets. Great Britain: Cambridge University Press.

Prakash, K., & Maiti, D. (2016). Does devaluation improve trade balance in small island economies? The case of Fiji. Economic Modelling, 55, 382-393. doi:10.1016/j.econmod.2016.02.023

Rahayu, S. E. (2021). Analysis of Indonesian non-oil and gas export development by manufacturing sector 2016-2020 period. In Journal of International Conference Proceedings (JICP,) 4(2), 576-583. doi:10.32535/jicp.v4i2.1294

Shahbaz, M. (2012). Does trade openness affect long run growth? Cointegration, causality and forecast error variance decomposition tests for Pakistan. Economic Modelling, 29(6), 2325-2339. doi:10.1016/j.econmod.2012.07.015

Simo-Kengne, B. D., Gupta, R., & Aye, G. C. (2015). House prices and balance of trade dynamics in South Africa: evidence from an agnostic identification procedure. Journal of Housing Research, 24(1), 107-126. doi:10.1080/10835547.2015.12092094

Talla, J. T. (2013). Impact of macroeconomic variables on the stock market prices of the Stockholm stock exchange (OMXS30). Jonkoping International Business School, 01-48.

Tarika, S., & Seema, M. (2011). Macroeconomic factors and stock returns: Evidence from Taiwan. Journal of economics and international finance, 3(4), 217-227.

Trading Economics. (2020). Indonesia trade balance. Retrieved from https://tradingeconomics.com/indonesia/balance-of-trade

Zhao, Y. (2013). Borrowing constraints and the trade balance–output comovement. Economic Modelling, 32, 34-41. doi:10.1016/j.econmod.2013.01.024

DOI: https://doi.org/10.32535/ijafap.v6i2.1974