Foreign Interest Rates and the Islamic Stock Market Integration between Indonesia and Malaysia


1 Department of Mathematics, Universitas Halu Oleo, Kendari, Indonesia

2 Department of Economics, Universitas Halu Oleo, Kendari, Indonesia




his study aimed to examine the Islamic stock market integration between Indonesia and Malaysia, and the effect of foreign interest rates on both stock markets. This study used the monthly time series of Jakarta Islamic Index, Hijrah Syariah Index, and foreign interest rates within a period from August 2000 to January 2016. Result of cointegration test demonstrates that while there is a cointegration between Jakarta Islamic Index and Hijrah Shariah Index, no cointegration occurred between Jakarta Islamic Index, Hijrah Shariah Index, and foreign interest rates. Estimation result of the VAR model indicates that there is a long-run relationship between Jakarta Islamic Index and Hijrah Shariah Index, and that there is integration between Indonesian and Malaysian Islamic stock markets. Furthermore, estimation result of the VARX model reveals that foreign interest rates only affected Malaysian Islamic stock price index.


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