The US Quantitative Easing and Indonesian Financial market. Does it matter?

  • Muhammad Teguh Faculty of economics Universitas Sriwijaya, Palembang
  • Sri Andaiyani Universitas Sriwijaya
Keywords: quantitative easing, exchange rate, stock market, bond market, unconventional monetary policy.


After financial crisis 2008, the central bank of the United States, known as Federal Reserve or the Fed, injected unprecedented amount of liquidity through large-scale asset purchases (LSAPs), which is also called as quantitative easing (QE). Lower long-term bond yields in the U.S. related to QE also made investors switched to other investment assets in the emerging market economies (EMEs) such as corporate bonds and privately issued securities. Indonesia, as one of the important EMEs in the world, also received higher capital inflows during the Fed’s QE period. Therefore, this study attempts to analyze the impact of the Fed’s quantitative easing policy towards volatility of financial sector in Indonesia by using Vector Autoregressive (VAR) model. Financial sector in this study focused on stock market, bond market and exchange rate market. The result shows that the Fed’s quantitative easing plays greater role in explaining Rupiah exchange rate, compared to Indonesia composite index and long-term bond yields. This study found negative and significant relationship between US money supply and exchange rate. It could relate to the increasing of Indonesia composite index so that demand for Rupiah exchange rate increased.


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How to Cite
Teguh, M., & Andaiyani, S. (2019). The US Quantitative Easing and Indonesian Financial market. Does it matter?. Journal of Research in Business, Economics and Management, 13(3), 2455-2462. Retrieved from