ϯϰ
year of 2010. Consumer price index define the level of goods price and services which consume by society. CPI data that used
in this study is monthly data which stated in indexes.
d. Exchange Rate
Exchange rate that used in this study is middle exchange rate which is the exchange rate at the closing of money market.
Exchange rate that used in this study is monthly exchange rate which stated in IDRUSD.
e. Money Supply
Money supply is the total amount of money available in an economy. Money supply is divided into M1 and M2. Money
supply in this study stated in Rupiah.
f. BI Rate
BI rate becomes the representative of policy rate reflecting the monetary policy stand. It is adopted by Bank Indonesia and being
publicly announced by the Board of Governors of Bank Indonesia in each monthly Board of Governors Meeting. BI rate serves as
opportunity cost of stock market investment and standard of Indonesian interest rate measurement.
3.5 Analysis Method
Analysis methods that used in this research are Cointergration Test and Vector Error Correction Model VECM to see the relationship of
seven non-stationer variables in short-term and long-term. Data and model in this research is in Ln form, where the estimation result can show the
elasticity because the result in the same unit such as, percentage, so that the relationship among variables are more rationale.
ϯϵ
According to Sims 1992 in Ajija 2007 impulse response function IRF illustrates the expectation of future period from variable forecast
deviation due to other variable innovation effects. It exposes the existence of shock variable to other variable until its equilibrium point. Variance
decomposition of forecast error variance decomposition becomes an instrument of VAR that separate the estimated variable to be shock
variable or innovation variable; where it assumes that the innovation variable do not correlate each others. The variance decomposition analysis
provides information of the movement of shock variable to certain variables and so to another shock variable.
3.6 Research Plan
In order to understand the undergraduate thesis clearly, so the researcher divided the materials into several sub-chapters with systematic
writing as follows:
Chapter I, Introduction;This chapter describes the general information
that the research background, problem formulation, purpose and benefits of the research, the scope of research, time and place of study, research
methodology, and systematic research.Chapter II, Theoritical Framework and Hypothesis; This chapter contains the theory that some