PLUNGING OIL PRICES IMPACT MALAYSIA’S AND INDONESIA’S ECONOMY
Tinfah Chung () and
Ong Jie Shi ()
Additional contact information
Ong Jie Shi: Taylor’s University, Malaysia
Eurasian Journal of Economics and Finance, 2017, vol. 5, issue 1, 49-68
Oil has a profound impact on the world economy. This study examines the impact of changes (falling) in oil prices on the two oil producing ASEAN countries – Malaysia and Indonesia using quarterly data from 2005:Q1 to 2014:Q4. A cointegration analysis using an autoregressive distributed lag equation (ARDL) is conducted between oil and the Malaysian and Indonesian economy. Next, single equations are estimated on the impact of oil price changes on macroeconomic variables, followed by a VAR formulation to trace the impact of oil price using impulse response function and variance decomposition. The single equation estimates indicate that real oil prices have a significant positive impact on Malaysia/Indonesia GDP, while it is insignificant on inflation rate and real exchange rate. Using an unrestricted VAR model, real oil price growth shocks have positive and negative response on the growth of Malaysia GDP, Indonesia GDP and US GDP. However, the negative response is found more significant for the growth of Indonesia GDP, while the growth of US GDP has a larger influence on Malaysia GDP as compared to Indonesia GDP. Changes in real oil price are less impactful on Malaysia government expenditure and Malaysian Ringgit, compared to inflation rate and net exports.
Keywords: Autoregressive Distributed Lag (ARDL); Stationarity; Cointegration; VAR; Impulse Response Function and Variance Decomposition (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
https://eurasianpublications.com/Eurasian-Journal- ... No.1-2017/EJEF-4.pdf (text/html)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:ejn:ejefjr:v:5:y:2017:i:1:p:49-68
Access Statistics for this article
Eurasian Journal of Economics and Finance is currently edited by Doojin Ryu
More articles in Eurasian Journal of Economics and Finance from Eurasian Publications
Bibliographic data for series maintained by ().