The effect of asymmetrical relationship of oil price shocks on gross domestic product
This paper revisits the asymmetrical crude oil prices and Gross Domestic Product (GDP) relationship for Malaysia and Indonesia using Hansen (2000) Threshold regression method. The empirical analysis uses quarterly data for the period of 1990 (quarter 1) until 2018 (quarter 1). The paper confirms t...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
Penerbit Universiti Kebangsaan Malaysia
2021
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| Online Access: | http://journalarticle.ukm.my/18793/ http://journalarticle.ukm.my/18793/1/jeko_552-10-1.pdf |
| Summary: | This paper revisits the asymmetrical crude oil prices and Gross Domestic Product (GDP) relationship for Malaysia
and Indonesia using Hansen (2000) Threshold regression method. The empirical analysis uses quarterly data for
the period of 1990 (quarter 1) until 2018 (quarter 1). The paper confirms the nonlinearities in the oil price-GDP
relationship for Malaysia and Indonesia. The findings reveal that when oil prices are below USD37, oil price shocks
have a negative impact on Malaysian GDP, but positively affect GDP when oil price are between USD37 to USD55.
Indonesia’s GDP, on the other hand, responds favourably to changes in oil prices when they are below USD47, but
negatively affects GDP when oil price exceeds USD47. Both countries’ GDP responses to oil price shocks are linked
to the issues such as the degree of oil dependency, oil self-sufficiency, and government efficiency in managing revenue
from the oil sector and the ease with which critical policy adjustments take place. |
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