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FORMOSA NEWS - Cirebon - How Macroeconomic Shifts Reshaped the Jakarta Composite Index and Investor Dynamics from 2020 to 2024. A new study by Handreana Rheymanda Setiawan, Moh Yudi Mahadianto, and Mardi from Universitas Swadaya Gunung Jati examines how key macroeconomic variables influenced the Jakarta Composite Index (JCI) on the Indonesia Stock Exchange during the volatile period of 2020 to 2024. Published in 2026, the quantitative research tracks the direct impacts of broader monetary indicators on national stock performance, offering vital insights for investors navigating shifting economic landscapes. The findings reveal that while growing domestic liquidity and steady interest policies acted as positive catalysts for stock valuation, an ongoing depreciation of the Rupiah placed substantial downward pressure on the market index.
Background and Market Relevance
The performance of the Jakarta Composite Index serves as a primary barometer for the health of Indonesia's capital market. Understanding the underlying drivers of this index is increasingly critical as global markets face structural shifts, policy adjustments, and changing capital flows. Macroeconomic forces dictate the availability of capital and heavily influence the expectations of market participants. Prior academic discussions have yielded conflicting reports regarding how sensitive the stock exchange is to shifts in benchmark interest rates or currency volatility. By focusing explicitly on the specific M2 money supply category which includes both active currency circulation and quasi-money like time deposits this research clarifies how central monetary interventions and structural regulations directly translate into market valuation trends.
Research Methodology
The authors adopted a descriptive quantitative approach to analyze the financial data. The investigation utilized secondary data comprising 60 monthly observations spanning the five-year period from 2020 through 2024. These records were compiled directly from the official portals of Bank Indonesia and the Central Statistics Agency (BPS). To map the relationships between the variables, the research team applied multiple linear regression analysis via statistical modeling software. The reliability of the data was verified using comprehensive classical assumption tests to ensure the absence of analytical distortions, such as data non-normality, structural internal correlation, or uneven variance distribution.
Key Findings and Statistical Results
The statistical analysis isolated clear, distinct paths of influence for each economic indicator on the performance of the Jakarta Composite Index:
Implications and Real-World Impact
These insights provide a clear strategic framework for policymakers, monetary regulators, and portfolio managers alike. For the government and Bank Indonesia, the results underline the necessity of maintaining balanced liquidity expansion while mitigating extreme currency volatility to preserve an appealing investment climate. For institutional investors and corporations, the clear negative impact of currency depreciation serves as an explicit warning to hedge against foreign exchange risks, particularly for import-dependent entities. Understanding these relationships allows market participants to better anticipate how broad policy shifts will alter equity valuations.
Author Profile
Handreana Rheymanda Setiawan holds an academic degree from Universitas Swadaya Gunung Jati, where he specializes in financial economics and management analytics. His research focuses primarily on the intersection of macroeconomic indicators, monetary policies, and capital market performance metrics.
Background and Market Relevance
The performance of the Jakarta Composite Index serves as a primary barometer for the health of Indonesia's capital market. Understanding the underlying drivers of this index is increasingly critical as global markets face structural shifts, policy adjustments, and changing capital flows. Macroeconomic forces dictate the availability of capital and heavily influence the expectations of market participants. Prior academic discussions have yielded conflicting reports regarding how sensitive the stock exchange is to shifts in benchmark interest rates or currency volatility. By focusing explicitly on the specific M2 money supply category which includes both active currency circulation and quasi-money like time deposits this research clarifies how central monetary interventions and structural regulations directly translate into market valuation trends.
Research Methodology
The authors adopted a descriptive quantitative approach to analyze the financial data. The investigation utilized secondary data comprising 60 monthly observations spanning the five-year period from 2020 through 2024. These records were compiled directly from the official portals of Bank Indonesia and the Central Statistics Agency (BPS). To map the relationships between the variables, the research team applied multiple linear regression analysis via statistical modeling software. The reliability of the data was verified using comprehensive classical assumption tests to ensure the absence of analytical distortions, such as data non-normality, structural internal correlation, or uneven variance distribution.
Key Findings and Statistical Results
The statistical analysis isolated clear, distinct paths of influence for each economic indicator on the performance of the Jakarta Composite Index:
- M2 Money Supply: The broad money supply demonstrated a substantial positive and statistically significant relationship with the market index. Higher overall liquidity within the domestic economy effectively channels more capital into financial assets, raising market demand and driving up stock values.
- BI Interest Rates: Central bank interest rates also registered a positive and significant impact on the index during this period. Rather than suppressing growth, adjustments to the benchmark interest rate functioned as stabilizing signals that demonstrated proactive inflation control, which in turn reinforced investor confidence.
- Rupiah Exchange Rate: The exchange rate showed a pronounced negative and significant effect on the JCI. When the Rupiah weakens against foreign currencies, corporations face escalating costs for imported raw materials and higher financial burdens on foreign debt exposure, suppressing profitability and triggering capital reallocation away from equities.
Implications and Real-World Impact
These insights provide a clear strategic framework for policymakers, monetary regulators, and portfolio managers alike. For the government and Bank Indonesia, the results underline the necessity of maintaining balanced liquidity expansion while mitigating extreme currency volatility to preserve an appealing investment climate. For institutional investors and corporations, the clear negative impact of currency depreciation serves as an explicit warning to hedge against foreign exchange risks, particularly for import-dependent entities. Understanding these relationships allows market participants to better anticipate how broad policy shifts will alter equity valuations.
Author Profile
Handreana Rheymanda Setiawan holds an academic degree from Universitas Swadaya Gunung Jati, where he specializes in financial economics and management analytics. His research focuses primarily on the intersection of macroeconomic indicators, monetary policies, and capital market performance metrics.
Dr. Moh Yudi Mahadianto, S.E., M.M. is a senior lecturer and academic researcher within the Faculty of Economics and Business at UGJ, with expertise in corporate governance, financial management, and tax compliance systems.
Dr. Mardi, S.E., M.Si. is an expert in accounting methodologies and corporate social responsibility tracking at UGJ, focusing his research on corporate management strategies and sustainability accounting.
Source
https://doi.org/10.55927/ajma.v5i3.16562
URL: https://journal.formosapublisher.org/index.php/ajma
Handreana Rheymanda Setiawan, Moh Yudi Mahadianto, dan Mardi: The Effect of Rate of Money Supply (M2), Interest Rates and Exchange Rates on the Composite Stock Price Index (JCI). Asian Journal of Management Analytics (AJMA). Vol. 5, No. 3, Tahun 2026 Hal. 479-492.
DOI: URL: https://journal.formosapublisher.org/index.php/ajma
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