Cointegration Between Palm Oil Price and Soybean Oil Price: A Study on Market Integration

Mohammad Haji Alias and Jamal Othman
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Mohammad Haji Alias: Faculty of Economics Universiti Kebangsaan Malaysia 43600 UKM Bangi Selangor Darul Ehsan
Jamal Othman: Faculty of Economics Universiti Kebangsaan Malaysia 43600 UKM Bangi Selangor Darul Ehsan

Jurnal Ekonomi Malaysia, 1998, vol. 32, 39-50

Abstract: The main objective of the paper is to present a cointegration approach to ascenain whether there exists a long run relationship between palm oil price and soybean oil price. A related objective is to investigate causality patterns between the two price series using the Granger causality test. The study established that the time series all palm oil and soybean oil prices are cointegrated even though separately, each time series is non-stationary. This suggests there exists a long run equilibrium relationship between the two variables. Bidirectional causality is established at the 5 per cent level of significance for the F-test, however, at the I per cent level of significance, a unidirectional causality from soybean oil price 10 palm oil price is established.

Date: 1998
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