Oil prices and Malaysian economy
This paper studies the impact of oil prices on GDP in Malaysia. In particular, three types of oil prices; world oil price (PW), world oil price in domestic currency (PWD), and domestic oil price (PD) are tested against the GDP within VAR framework. Based on the findings, change in PD oil price ap...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
World Business Institute
2009
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| Subjects: | |
| Online Access: | http://irep.iium.edu.my/11258/ http://irep.iium.edu.my/11258/ http://irep.iium.edu.my/11258/1/11258.pdf |
| Summary: | This paper studies the impact of oil prices on GDP in Malaysia. In particular,
three types of oil prices; world oil price (PW), world oil price in domestic currency
(PWD), and domestic oil price (PD) are tested against the GDP within VAR
framework. Based on the findings, change in PD oil price appears to have the
most pronounced effect to the GDP. It is because, significant results of PD
analysis are documented both in short-run and long-run tests. In the asymmetric
test, significant result is documented in PD analysis only. The finding signifies the
presence of asymmetric relationship between oil price changes and the
economy. With these evidences we conclude that, policymakers may consider
using PD oil price as a policy tool in the case oil price increase strikes again in
the future. In the event policymakers are faced with policy options of either to
increase or decrease the oil price, they should be aware that oil price decrease
gives significant effect to the economy than oil price increase. |
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