Exchange rates, bond yields and the stock market: nonlinear evidence of Indonesia during the COVID-19 period
Year: 2023
Type: article
Abstract: Purpose The authors explore the relationship between the exchange rate, bond yield and the stock market as well as the effect of capital market dynamics on the exchange rate before and during the COVID-19 pandemic. Design/methodology/approach The authors employ a non-linear autoregressive distributed lag (NARDL) methodology using daily data of the Indonesian economy over the period 2012–2021. Findings Whilst, over the full sample period, the authors find no cointegration between the exchange rate, the 10-year bond yield and stock market, for the COVID-19 period, evidence of cointegration is present. Furthermore, the results suggest that asymmetric effects are evident both in the short as well as the long run. Originality/value To the best of the authors’ knowledge, this is the first time that the relationship between the exchange rate, bond yield and the stock market as well as the effect of capital market dynamics on the exchange rate before and during the COVID-19 pandemic has been explored in the case of the Indonesian economy.
Authors: Billy Prananta, Constantinos Alexiou
Institutions: Bank Indonesia, Cranfield University
Language: English
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W4362630867