Credit Inflation and IDR Exchange Rate Effects on Equity Mutual Fund NAV: The Mediating Role of IDX Composite

Purpose: This study examines the effects of inflation and the IDR/USD exchange rate on the Net Asset Value (NAV) of Indonesian equity mutual funds (2015–2019), with the IDX Composite as a mediating variable, providing insights for investors, policymakers, and fund managers.

Methodology: A quantitative associative design using panel data from 61 equity mutual funds registered with OJK was employed. Data were sourced from OJK, Bank Indonesia, and IDX. Partial Least Squares Structural Equation Modeling (PLS-SEM) with SmartPLS tested direct effects (inflation and exchange rate on IDX Composite and NAV) and indirect effects (IDX Composite as mediator), with bootstrapping applied for path significance.

Results: Inflation negatively affects IDX Composite (β = −0.786, p = 0.010) and NAV (β = −0.672, p = 0.032), while the IDR exchange rate positively affects IDX Composite (β = 0.498, p < 0.001) and NAV (β = 0.787, p = 0.042). IDX Composite positively influences NAV (β = 0.510, p = 0.024) and mediates the relationships of inflation → NAV (β = −0.40, p = 0.047) and exchange rate → NAV (β = 0.58, p = 0.028). R² values are 0.780 (IDX Composite) and 0.688 (NAV).

Conclusions: Both inflation and the IDR exchange rate affect equity fund NAV directly and indirectly via the IDX Composite, confirming full mediation. The IDR exchange rate is the strongest positive driver of NAV, while inflation suppresses market index and fund valuations.

Limitations: The study covers only 2015–2019 and Indonesian equity funds; annual data may obscure intra-year volatility; unobserved fund-specific factors are uncontrolled.

Contributions: This study provides empirical PLS-SEM evidence of macroeconomic transmission from inflation and exchange rate through the market index to equity fund NAV, informing investment strategy and monetary policy.