Dynamic Impact of Inflation and Exchange Rate in Indonesia's Top 10 Market Capitalization Companies: Implications for Stock Prices


  • Irsan Hardi Economic Modeling and Data Analytics Unit, Graha Primera Saintifika, Aceh Besar 23371, Indonesia
  • Ghalieb Mutig Idroes Energy and Green Economics Unit, Graha Primera Saintifika, Aceh Besar 23371, Indonesia
  • Resty Tamara Utami Department of Economics and Finance for Development, University of Bradford, Bradford BD7 1DP, United Kingdom
  • Putri Dahlia Leeds University Business School, University of Leeds, Leeds LS2 9JT, United Kingdom
  • Muhammad Alfin Falha Mirza International Development Studies, Faculty of Geosciences, Utrecht University, Utrecht 3584 CB, Netherlands
  • Rais Aulia Humam International Department of Management, Faculty of Economics & Business, Universitas Brawijaya, Jawa Timur 65300, Indonesia
  • Rizka Chairunnisa The Professional Accounting Education, Faculty of Economics and Business, University of Indonesia, Jawa Barat 16424, Indonesia
  • Natasha Athira Keisha Hardia Department of Management, Faculty of Economics and Business, Universitas Syiah Kuala, Banda Aceh 23111, Indonesia
  • Rimal Mahdani Department of Accounting, Faculty of Economics, Universitas Teuku Umar, Meulaboh 23615, Indonesia




Macroeconomic factors, Stock price, Inflation, Exchange rate, DOLS, FMOLS


Macroeconomic factors are widely believed to have a crucial role in affecting a company's financial health and, ultimately, its stock price. The study addresses this important issue by investigating the long-term impact of inflation and exchange rates on firm stock prices. This study adopts both panel and cross-firm modeling, along with a dynamic approach, which no prior study has ever conducted in Indonesia’s top 10 market capitalization companies. It utilizes monthly data spanning from September 2008 to August 2023. To generate insights into long-term effects, the study applies the Dynamic Ordinary Least Squares (DOLS) method, with a robustness check using the Fully-Modified Ordinary Least Squares (FMOLS) method. The econometric estimations yield results that are consistent with the hypotheses, indicating that the rise in inflation levels has a negative effect, while the strengthening of the domestic currency in exchange rates positively influences firm stock prices in the long term. This implies that investors should carefully assess and navigate inflationary environments, consider diversifying their portfolios across industries and international markets, and maintain a long-term perspective when making investment decisions in the unique context of Indonesia's market landscape.


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How to Cite

Hardi, I., Idroes, G. M., Utami, R. T., Dahlia, P., Mirza, M. A. F., Humam, R. A., Chairunnisa, R., Hardia, N. A. K., & Mahdani, R. (2023). Dynamic Impact of Inflation and Exchange Rate in Indonesia’s Top 10 Market Capitalization Companies: Implications for Stock Prices. Indatu Journal of Management and Accounting, 1(2), 51–59. https://doi.org/10.60084/ijma.v1i2.110