Attention of Economic Growth and Oil Prices: Evidence from Indonesia

Yijo Syaharuddin, Purwadi Purwadi and Alexander Sampeliling
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Yijo Syaharuddin: Department of Management, Faculty of Economics and Business, Universitas Mulawarman, Samarinda City 75117, Province of East Borneo, Indonesia.
Purwadi Purwadi: Department of Management, Faculty of Economics and Business, Universitas Mulawarman, Samarinda City 75117, Province of East Borneo, Indonesia.
Alexander Sampeliling: Department of Management, Faculty of Economics and Business, Universitas Mulawarman, Samarinda City 75117, Province of East Borneo, Indonesia.

International Journal of Energy Economics and Policy, 2021, vol. 11, issue 5, 425-433

Abstract: Oil is a commodity that can cause turmoil for the global economy. This study attempts to examine the relationship between oil prices and economic growth together with the exchange rate and inflation rate in Indonesia. The time span covered by this series is from 2000 (Q1) to 2019 (Q4), providing 80 observations. Tests carried out in this study included unit root testing through Augmented Dickey-Fuller (ADF) testing, Phillips-Perron (PP) testing, Kwiatkowski-Phillips-Schmidt-Shin (KPSS) testing, Johansen and Juselius cointegration test, Granger-based causality test. Vector Error Correction Model (VECM) to determine long-term and short-term relationships, and Variance Decomposition and Impulse Response Function to investigate relationships outside the sample. The empirical findings show that there is a relationship between variables, oil prices not only affect economic growth but also have an impact on the exchange rate and inflation rate. Furthermore, the results of the short-run Granger causality for the tested variables indicate a unidirectional causality that runs from all independent variables, namely oil prices, exchange rates, and the rate of inflation on GDP. In addition, there is a causal relationship between GDP and other determinants outside the sample. The addition of time-frames and variables can add to the variance of the sustainability of these findings in the future.

Keywords: Oil price shocks; Economic growth; Panel data; Regression method; Indonesia. (search for similar items in EconPapers)
JEL-codes: A1 C23 D24 (search for similar items in EconPapers)
Date: 2021
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