G20 Presidency and the Economic Symbiosis of India and Indonesia Based on the Stock Market, Exchange Rate, and Foreign Trade

Introduction/Main Objectives: The primary aim of the research is to assess the long-run and short-run dynamic interaction of the stock market, exchange rate and foreign trade between India and Indonesia during the period covered by their successive G20 presidencies. Background Problems: Given the economic significance of India and Indonesia, it is important to examine the performance of their stock market, exchange rate and foreign trade, and explore any connections between them, with the two-year period covered by their recent G20 presidencies providing an interesting window. Novelty: Despite India and Indonesia being emerging economic powerhouses, there are no studies exploring their economic nexus in the context of their successive G20 presidencies This period is chosen because under the G20 framework, both countries intensified their economic and climate collaboration, in turn enhancing their interdependence to make it pivotal. Research Methods: This study examines the empirical relationship between exchange rates, foreign trade, and the stock market indices of India and Indonesia during their G20 presidencies. It analyses historical data from December 2021 to November 2023 using econometric methods to understand the dynamic interactions among these variables. Finding/Results: Over the two years analysed, all economic variables are non-stationary and integrated at level one. Johansen's cointegration test shows long-run equilibrium between the chosen variables. The VECM suggests that short-run deviations in the JKSE are corrected by other variables. The OLS regression finds that changes in the JKSE are significantly explained by Indonesia's net trade. Additionally, the study confirms short-run interaction between the selected economic variables. Conclusion:The study uncovers connections between India and Indonesia's key economic variables, empowering both countries to make informed decisions on bilateral trade, currency policies, and economic cooperation. This understanding of short-term dynamics and long-term associations also assists investors in shaping investment strategies and managing risks effectively.