Assessing the mechanism of oil price fluctuation and fiscal policy response in the Malaysian economy

The present paper analyzes the effects of oil price fluctuation on the economy;and fiscal policy response to the Malaysian economy. The data are analyzed utilizing a co-integration test, variance decomposition (VDC) and impulse response function (IRF) analysis under the unrestricted vector autoreg...

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Main Author:	Nora Yusma Mohamed Yusoff
Format:	Article
Language:	English
Published:	Penerbit Universiti Kebangsaan Malaysia 2013
Online Access:	http://journalarticle.ukm.my/8120/ http://journalarticle.ukm.my/8120/ http://journalarticle.ukm.my/8120/1/7266-18716-1-SM.pdf

id	ukm-8120
recordtype	eprints
spelling	ukm-81202016-12-14T06:46:17Z http://journalarticle.ukm.my/8120/ Assessing the mechanism of oil price fluctuation and fiscal policy response in the Malaysian economy Nora Yusma Mohamed Yusoff, The present paper analyzes the effects of oil price fluctuation on the economy;and fiscal policy response to the Malaysian economy. The data are analyzed utilizing a co-integration test, variance decomposition (VDC) and impulse response function (IRF) analysis under the unrestricted vector autoregression (VAR) methodology. The empirical findings of this study suggest that, in the short run, the Malaysia economy benefits from higher oil prices, as oil price shocks positively affect oil revenue. However, the real GDP of Malaysia is vulnerable to oil price fluctuations in the short term horizon. Meanwhile, oil price hikes exhibit an increasing trend for both GDP and total subsidy in the long run. Also, the results confirm that the changes in world oil prices have a significant short term impact on total government expenditure. These confirm that that fiscal policy is the main mechanism channel that determines the degree to which oil price shocks affect the economy. The study suggests that the adoption of expansionary fiscal policies during oil price shocks can facilitate rapid economic growth in the long run, as long as stable and persistent economic policies exist within the macroeconomic framework. Penerbit Universiti Kebangsaan Malaysia 2013 Article PeerReviewed application/pdf en http://journalarticle.ukm.my/8120/1/7266-18716-1-SM.pdf Nora Yusma Mohamed Yusoff, (2013) Assessing the mechanism of oil price fluctuation and fiscal policy response in the Malaysian economy. Jurnal Ekonomi Malaysia, 47 (2). pp. 69-81. ISSN 0127-1962 http://ejournals.ukm.my/jem/index
repository_type	Digital Repository
institution_category	Local University
institution	Universiti Kebangasaan Malaysia
building	UKM Institutional Repository
collection	Online Access
language	English
description	The present paper analyzes the effects of oil price fluctuation on the economy;and fiscal policy response to the Malaysian economy. The data are analyzed utilizing a co-integration test, variance decomposition (VDC) and impulse response function (IRF) analysis under the unrestricted vector autoregression (VAR) methodology. The empirical findings of this study suggest that, in the short run, the Malaysia economy benefits from higher oil prices, as oil price shocks positively affect oil revenue. However, the real GDP of Malaysia is vulnerable to oil price fluctuations in the short term horizon. Meanwhile, oil price hikes exhibit an increasing trend for both GDP and total subsidy in the long run. Also, the results confirm that the changes in world oil prices have a significant short term impact on total government expenditure. These confirm that that fiscal policy is the main mechanism channel that determines the degree to which oil price shocks affect the economy. The study suggests that the adoption of expansionary fiscal policies during oil price shocks can facilitate rapid economic growth in the long run, as long as stable and persistent economic policies exist within the macroeconomic framework.
format	Article
author	Nora Yusma Mohamed Yusoff,
spellingShingle	Nora Yusma Mohamed Yusoff, Assessing the mechanism of oil price fluctuation and fiscal policy response in the Malaysian economy
author_facet	Nora Yusma Mohamed Yusoff,
author_sort	Nora Yusma Mohamed Yusoff,
title	Assessing the mechanism of oil price fluctuation and fiscal policy response in the Malaysian economy
title_short	Assessing the mechanism of oil price fluctuation and fiscal policy response in the Malaysian economy
title_full	Assessing the mechanism of oil price fluctuation and fiscal policy response in the Malaysian economy
title_fullStr	Assessing the mechanism of oil price fluctuation and fiscal policy response in the Malaysian economy
title_full_unstemmed	Assessing the mechanism of oil price fluctuation and fiscal policy response in the Malaysian economy
title_sort	assessing the mechanism of oil price fluctuation and fiscal policy response in the malaysian economy
publisher	Penerbit Universiti Kebangsaan Malaysia
publishDate	2013
url	http://journalarticle.ukm.my/8120/ http://journalarticle.ukm.my/8120/ http://journalarticle.ukm.my/8120/1/7266-18716-1-SM.pdf
first_indexed	2023-09-18T19:51:33Z
last_indexed	2023-09-18T19:51:33Z
_version_	1777406253545291776

Assessing the mechanism of oil price fluctuation and fiscal policy response in the Malaysian economy

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