Contagion and spillover effects of global financial markets on the Indonesian Sharia Stock Index post-COVID-19

  • Received May 2, 2023;
    Accepted June 30, 2023
  • Author(s)
  • DOI
    http://dx.doi.org/10.21511/imfi.20(3).2023.04
  • Article Info
    Volume 20 2023, Issue #3, pp. 35-47
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This work is licensed under a Creative Commons Attribution 4.0 International License

This study aims to examine the spillover and contagion effects of global financial markets on the Indonesian Sharia Stock Index (ISSI) post-COVID-19. The study uses the Vector Error Correction Model method to explore the short-term and long-term relationships between ISSI and global financial markets. The data used in this study are time series data, namely the ISSI and several other countries that have a significant influence on the global economy, which were observed from May to July 2022. The results of the study show that the USD has a positive influence on ISSI in the short and long term. At the same time, the JPY and HKD have a negative influence on ISSI. The GBP and SGD do not have a significant influence on ISSI developments. The economic, business and financial sectors began to adjust after the COVID-19 pandemic ended, including the Indonesian Sharia Stock Index. Contagion occurs from one country’s financial system to another, which is influenced by aspects of volatility, exchange rates, the global crisis, the stock market, and stock indices. It is considered that this study can help the government to adjust better conditions of Islamic stocks in Indonesia.

Acknowledgment
The authors would like to thank the Research and Innovation Institute (LRI), Universitas Muhammadiyah Surakarta, for the enormous financial support in writing this study through the HIT funding scheme with number 02/A.6-II/FAI/1/2022.

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    • Figure 1. Inverse root of AR characteristic polynomial
    • Figure 2. Respondent impulse function
    • Table 1. Unit root test result
    • Table 2. VAR stability test
    • Table 3. Lag optimum test
    • Table 4. Cointegration test
    • Table 5. Long-term cointegration
    • Table 6. Short-term effects
    • Conceptualization
      Nur Rizqi Febriandika, Fifi Hakimi, Maratul Awalliyah, Yayuli
    • Investigation
      Nur Rizqi Febriandika, Maratul Awalliyah
    • Methodology
      Nur Rizqi Febriandika, Fifi Hakimi, Maratul Awalliyah
    • Supervision
      Nur Rizqi Febriandika, Yayuli
    • Validation
      Nur Rizqi Febriandika, Yayuli
    • Writing – original draft
      Nur Rizqi Febriandika, Maratul Awalliyah, Yayuli
    • Writing – review & editing
      Nur Rizqi Febriandika, Fifi Hakimi, Yayuli
    • Software
      Fifi Hakimi, Maratul Awalliyah