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Economic Growth: How Inflation and the Exchange Rate Work Through the Stock Market as a Mediating Variable

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  • Vietha Devia SS

Abstract

This study aims to investigate the impact of inflation and the exchange rate on economic growth through the stock market as a mediating variable. The analysis tool used a path model with monthly data. The research period lasted for 14 years from 2004 to 2017. The data was obtained from the Central Statistics Bureau, Bank Indonesia and Jakarta Stock Exchange. Case studies were conducted in Indonesia and the researcher took the Consumer Goods Index as a variable in the stock market. The results show that inflation and the exchange rates do not significantly affect economic growth through the stock market. Alternatively, the stock market is not an excellent mediating variable between inflation and the exchange rate on economic growth. The size of the stock market and the awareness of domestic investors when accessing the stock market is thought to be the factors that influence how the inflation and exchange rates work.

Suggested Citation

  • Vietha Devia SS, 2019. "Economic Growth: How Inflation and the Exchange Rate Work Through the Stock Market as a Mediating Variable," Business and Economic Research, Macrothink Institute, vol. 9(4), pages 197-209, December.
    • Handle: RePEc:mth:ber888:v:9:y:2019:i:4:p:197-209
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    References listed on IDEAS

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    6. Richard Clarida & Daniel Waldman, 2007. "Is Bad News About Inflation Good News for the Exchange Rate?," NBER Working Papers 13010, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Vega-Gonzalez Luis Roberto, 2021. "The Patenting Dilemma in Mexican Public Universities: the Case of ICAT-UNAM," Business and Economic Research, Macrothink Institute, vol. 11(1), pages 59-81, March.

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    More about this item

    Keywords

    Inflation; Exchange rate; Economic growth; Stock market; Consumer Goods Index;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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