Palm oil export: is it price led or exchange rate led? evidence from Malaysia

Fahrurrazi Abubakar and Abul Masih

MPRA Paper from University Library of Munich, Germany

Abstract: Economic theory suggests that in a closed economy, the quantity demanded is sensitive to price and in an open economy, it is also sensitive to exchange rate. However, the theory can’t clearly tell us which variable is relatively the driver and which variable is the follower in the context of dynamic interdependence of the variables. We need to apply the dynamic time series techniques to obtain the relative lead-lag position between these variables. Malaysia is used as a case study. Findings suggest that in the long run, variables under study are theoretically related as evidenced in their being cointegrated. In addition, based on the generalized variance decompositions technique, the findings tend to suggest that exchange rate is the most exogenous variable followed by palm oil price and export volume. This is an important finding which is intuitive and does contain strong policy implications.

Keywords: Exchange rate; Price; Export; Palm Oil; lead-lag; VECM; VDC; Malaysia (search for similar items in EconPapers)
JEL-codes: C22 C58 E44 G15 (search for similar items in EconPapers)
Date: 2018-12-15
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/111229/1/MPRA_paper_111229.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:111229

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().