Journal of Economics and Management Volume 20, No. 2 September, 2024

Interactions among International Commodities, Macroeconomic Variables, Foreign Capital Market, and Mining Sector Index in Indonesia

Cheng-Wen Lee

Department of International Business, Chung Yuan Christian University, Taiwan, ROC

Muh. Irfandy Azis

Ph.D. Program in Business, Chung Yuan Christian University, Taiwan, ROC

Department of Accounting, Universitas Borneo Tarakan, Indonesia

Abstract

Indonesia has the most mineral resources in the world. However, Indonesia's mining sector's stock index has been trending downward for over a decade. This study aims to determine the factors that influence Mining Sector Index in Indonesia. Using the Vector Error Correction Model (VECM), we try to find short- and long-term effects and causal relationships between international commodities (crude oil and nickel), macroeconomic (exchange rate), foreign capital market (Shanghai Composite Index), and Mining Sector Index. The VECM indicates that the mining sector is sensitive to global commodity price fluctuations. Additionally, changes in mining stock prices can cause changes in the Chinese Yuan/Indonesian Rupiah exchange rate. This study also found that changes in crude oil, nickel, exchange rate, and the Shanghai Composite Stock Index have significant short-term and long-term effects on Indonesia's Mining Sector Stock Index. This study has implications for policymakers and investors that should pay attention to the commodity prices, especially the mining sector's performance, to ensure currency stability.

Keywords：International Commodities, Macroeconomic, Capital Market, Mining Sector Index

JEL Classifications：Q02, F21, F31, F32

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