MONETARY POLICY AND HERDING BEHAVIOR: EMPIRICAL EVIDENCE IN THE INDONESIAN STOCK MARKET BEFORE AND AFTER COVID-19
Keywords:
Monetary Policy, Herding Behavior, Covid-19, IndonesiaAbstract
This study examines the impact of the Federal Reserve and Bank Indonesia's monetary policies on herding behavior in the Indonesian stock market before and after the COVID-19 pandemic. The research found that changes in benchmark interest rates by the Fed and Bank Indonesia significantly caused herding behavior in the market. Before the pandemic, herding behavior occurred when the Fed lowered the Fed funds rate and Bank Indonesia raised the BI7DRR. After the pandemic, herding behavior occurred when the Fed raised the Fed funds rate and Bank Indonesia lowered the BI7DRR. The study suggests that Bank Indonesia's monetary policy should align with the Fed's to mitigate herding behavior, as the correlation between Bank Indonesia and the Fed's monetary policy was weakening post-pandemic. The findings highlight the importance of aligning monetary policies to mitigate herding behavior in the Indonesian stock marketReferences
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