Interdependence Between Islamic Capital Market and Money Market: Evidence from Indonesia

This study investigate VAR Toda-Yamamoto causality test between macroeconomic variables and Islamic financial market. The purpose of this study is to analyze the information content of Islamic capital market and Islamic money market return with respect to several macroeconomic indicators. Using bivariate method, we found that Islamic capital market index (JII) has more content information than Islamic money market index (SBIS). The exchange rate and interest rate (SBI) significantly affected JII. Otherwise, none of the macroeconomic variables found to significantly affect SBIS. Using multivariate method, SBIS has more content information (SBI, industry production index, and inflation rate) than JII (exchange rate). Contradiction in these findings indicates the presence of (i) interaction between the macroeconomic variables, (ii) interaction between the financial market and the macroeconomic variables, and (iii) interaction between the Islamic capital market and money market. Further, b