Academy of Strategic Management Journal (Print ISSN: 1544-1458; Online ISSN: 1939-6104)


Reflection of Bubbles Assets During the Global Financial Crisis Facing Covid-19 in Indonesia

Author(s): Moh. Adenan

 The movement of macroeconomic fundamentals prior to the global financial crisis is a phenomenon that arises as a result of the impact of a country's policies or economic turmoil. Investors will respond to this phenomenon by issuing capital (capital outflow) and investing (capital inflow), which causes the presumption of inflating the price of the asset value of the shares (asset bubbles). This study aims to detect the presence of an asset bubble and to determine the effect of macroeconomic fundamentals on the asset bubble during the global financial crisis in Indonesia. To detect an asset bubble, it can be done by comparing the Composite Stock Price Index (IHSG) with the Consumer Price Index (CPI). The fundamental influence of macroeconomics on asset bubbles is studied using the Vector Error Correction Model (VECM). The results of this study found that in Indonesia there was a small asset bubble from September to December 2010. In the short term, interest rates have a significant positive effect on the asset bubble, while in the long run all fundamental variables of exchange rates and interest rates have a positive effect, while inflation has a significant negative effect. Efforts to overcome this phenomenon can be controlled by reducing interest rates in the short term, while in the long run, increasing inflation and exchange rate depreciation can be controlled by decreasing the exchange rate.

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