The Influence of Inflation, Interest Rates and Exchange Rates- -Rupiah on the Composite Stock Price Index (IHSG) - -On the Indonesia Stock Exchange for the 2020-2024 Period

Abstract

This study investigates how three pivotal macroeconomic forces, inflation, domestic interest rates, and the rupiah to U.S. dollar exchange rate, shape stock market performance in Indonesia, as measured by the Indonesia Composite Stock Price Index (IHSG) on the IDX from 2020 to 2024. Adopting a quantitative framework, the research draws exclusively on monthly secondary data sourced from authoritative institutions: Bank Indonesia (monetary indicators), Statistics Indonesia (BPS; inflation and economic aggregates), and the Indonesia Stock Exchange (IDX; index values). To evaluate the relationships, a multiple linear regression model is estimated, enabling assessment of both individual (t-tests) and collective (via F-test) impacts of the predictors. Empirical results reveal that higher inflation and elevated interest rates are consistently linked to declines in the IHSG, with both effects statistically significant at the 5% level. In contrast, exchange rate movements show no measurable association with the index. The overall model is validated by a significant F-statistic, confirming that domestic monetary conditions play a decisive role in driving equity market behavior in Indonesia, even as global uncertainties intensify.