The Determinant of Local Palm Oil Price in Malaysia: Does the Covid-19 Pandemic Matter?

Thurai Murugan Nathan (), Abdelhak Senadjki () and Hui Nee Au Yong ()
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Thurai Murugan Nathan: Universiti Tunku Abdul Rahman, Faculty of Business and Finance
Abdelhak Senadjki: Universiti Tunku Abdul Rahman, Faculty of Business and Finance
Hui Nee Au Yong: Universiti Tunku Abdul Rahman, Faculty of Business and Finance

A chapter in Proceedings of the 10th International Conference on Business, Accounting, Finance and Economics (BAFE 2022), 2023, pp 333-347 from Springer

Abstract: Abstract Biodiesel is an alternative fuel and is getting substantial attention globally due to its environmental benefits. Biodiesel is one of Malaysia’s downstream movements of the palm oil industry. This industry is well known for its economic contribution to Malaysia’s income growth. This study determines the effect of biodiesel price and the Covid-19 pandemic on Malaysia’s local palm oil price using the monthly data which covered the period of January 2013 to June 2022. ARDL bound testing was adopted to test for cointegration. The dummy variable represents the lockdown period incorporated in the model. The findings indicate the existence of cointegration among variables. The real exchange rate and industrialization have a negative and significant impact on local palm oil prices, and crude oil and biodiesel prices positively affect Malaysia’s local palm oil prices. Interestingly, the impact of biodiesel price on the local palm oil price is higher than the crude oil price. The dummy variable, which represents the Covid-19 pandemic effect, shows a significant positive effect on the local palm oil price in the short and long run. Policies promoting the sustainable development of the palm oil and biodiesel industry will contribute to Malaysia through increased output, employment, and GDP.

Keywords: Malaysia; Biodiesel; Palm oil price; Environmental; Sustainable development goals; Supply and demand (search for similar items in EconPapers)
Date: 2023
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DOI: 10.2991/978-2-494069-99-2_26

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