Macroeconomic Impacts on Sukuk Performance in Indonesia: Co-integration and Vector Error Correction Model Approach

Abstract

The performance of Islamic bonds or sukuk can be influenced by many factors, internal and external. This study aims to analyze the long and short-term effects of macroeconomic variables such as BI rate (benchmark interest rate), inflation, exchange rate, changes in world gold prices and world oil prices on the performance of sukuk in Indonesia for the period from 2014 to 2017. This study employed the co-integration test to examine the long-term relationship among variables. The Vector Error Correction Model (VECM) model was used in the analysis because the results of the stationary test obtained stationary data at first difference and have long-term co-integration. The results show that the long-term change in sukuk return in Indonesia is influenced by changes in exchange rates, inflation and changes in world gold prices. While in the short term, performance of sukuk is influenced by the previous performance (one and two months), BI rate, exchange rates and world gold prices. Crude oil prices has no significant effect on sukuk performance both in the long and short term.