<![CDATA[This study investigates the short-term and long-term effects of macroeconomic shocks on the Indonesian Sharia Stock Index (ISSI) using the Vector Error Correction Model (VECM), Impulse Response Function (IRF), and Forecast Error Variance Decomposition (FEVD). Monthly data from 2011 to 2023 are employed to examine the influence of interest rates (RTE), inflation (IFLS), exchange rates (EXRT), foreign direct investment (FDI), and crisis conditions (CRS), where CRS is modeled as a dummy variable representing two major financial crisis periods. The VECM results indicate the presence of a long-term cointegration relationship, implying that ISSI is significantly affected by macroeconomic variables in the long run. In the short run, however, the findings show that these variables do not exert a significant immediate effect on ISSI. The IRF analysis reveals dynamic responses of ISSI to shocks in the predictor variables over 60 periods, with interest rates showing the strongest initial impact before gradually declining. FEVD results demonstrate that the contribution of each macroeconomic variable to ISSI fluctuations varies substantially over time. Furthermore, correlation analysis highlights the changing influence of macroeconomic variables during crisis periods, underscoring their role in shaping Islamic stock market dynamics. Overall, the empirical outcomes provide insights for developing adaptive strategies and investment decisions aligned with Islamic financial principles, including reverse Murabaha–based practices]]>
