Relationship between oil price and gross fixed capital formation: Malaysian case

Ariffhidayat Ali and Abul Masih

MPRA Paper from University Library of Munich, Germany

Abstract: The aim of this paper is to investigate the lead-lag relation between oil price and gross fixed capital formation in an economy incorporating some other relevant macroeconomic variables such as, money supply and exchange rate. The standard time series techniques are used for the analysis. Malaysia is taken as a case study. The variables are bound together by a theoretical relation as evidenced in their being cointegrated. The generalized variance decomposition analysis tends to indicate that oil price is the most exogenous variable leading all other variables including gross fixed capital formation. The findings contain strong policy implications for the emerging economies like Malaysia.

Keywords: oil price; gross fixed capital formation; VECM; VDC; Malaysia (search for similar items in EconPapers)
JEL-codes: C22 C58 E44 G15 (search for similar items in EconPapers)
Date: 2017-10-30
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