Do oil price fluctuations affect the inflation rate in Indonesia asymmetrically?
Changes in the oil price directly affect production costs, and subsequently, the general price level of products. With Indonesia observing an inflation targeting policy, this study applies the nonlinear autoregressive distributed lag (NARDL) technique to investigate the effect of oil price fluctuati...
| Main Authors: | , , |
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| Format: | Article |
| Published: |
World Scientific Publishing
2020
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| Online Access: | http://psasir.upm.edu.my/id/eprint/101007/ |
| _version_ | 1848863469581893632 |
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| author | Lim, Thye Goh Siong, Hook Law Trinugroho, Irwan |
| author_facet | Lim, Thye Goh Siong, Hook Law Trinugroho, Irwan |
| author_sort | Lim, Thye Goh |
| building | UPM Institutional Repository |
| collection | Online Access |
| description | Changes in the oil price directly affect production costs, and subsequently, the general price level of products. With Indonesia observing an inflation targeting policy, this study applies the nonlinear autoregressive distributed lag (NARDL) technique to investigate the effect of oil price fluctuations in Indonesia. The relationship is important for the central bank to gauge the effectiveness of the inflation targeting policy in immunizing the country from oil price fluctuations. Our findings have revealed that there was an asymmetric behavior between oil price and the inflation rate (producer price index), thus questioning the effectiveness of the inflation targeting policy. More specifically, in the long run, an increase in the oil price will tend to lead to an increase in the rate of inflation with a greater deviation, while an oil price reduction will lead to a decrease in the inflation rate with a lower deviation. This suggests that the benefits of an oil price reduction are not passed down to the consumer. |
| first_indexed | 2025-11-15T13:33:25Z |
| format | Article |
| id | upm-101007 |
| institution | Universiti Putra Malaysia |
| institution_category | Local University |
| last_indexed | 2025-11-15T13:33:25Z |
| publishDate | 2020 |
| publisher | World Scientific Publishing |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | upm-1010072023-07-12T07:46:00Z http://psasir.upm.edu.my/id/eprint/101007/ Do oil price fluctuations affect the inflation rate in Indonesia asymmetrically? Lim, Thye Goh Siong, Hook Law Trinugroho, Irwan Changes in the oil price directly affect production costs, and subsequently, the general price level of products. With Indonesia observing an inflation targeting policy, this study applies the nonlinear autoregressive distributed lag (NARDL) technique to investigate the effect of oil price fluctuations in Indonesia. The relationship is important for the central bank to gauge the effectiveness of the inflation targeting policy in immunizing the country from oil price fluctuations. Our findings have revealed that there was an asymmetric behavior between oil price and the inflation rate (producer price index), thus questioning the effectiveness of the inflation targeting policy. More specifically, in the long run, an increase in the oil price will tend to lead to an increase in the rate of inflation with a greater deviation, while an oil price reduction will lead to a decrease in the inflation rate with a lower deviation. This suggests that the benefits of an oil price reduction are not passed down to the consumer. World Scientific Publishing 2020-09-21 Article PeerReviewed Lim, Thye Goh and Siong, Hook Law and Trinugroho, Irwan (2020) Do oil price fluctuations affect the inflation rate in Indonesia asymmetrically? The Singapore Economic Review, 67 (04). 1333 - 1353. ISSN 0217-5908; ESSN : 1793-6837 https://www.worldscientific.com/doi/10.1142/S0217590820460030#:~:text=More%20specifically%2C%20in%20the%20long,rate%20with%20a%20lower%20deviation. 10.1142/S0217590820460030 |
| spellingShingle | Lim, Thye Goh Siong, Hook Law Trinugroho, Irwan Do oil price fluctuations affect the inflation rate in Indonesia asymmetrically? |
| title | Do oil price fluctuations affect the inflation rate in Indonesia asymmetrically? |
| title_full | Do oil price fluctuations affect the inflation rate in Indonesia asymmetrically? |
| title_fullStr | Do oil price fluctuations affect the inflation rate in Indonesia asymmetrically? |
| title_full_unstemmed | Do oil price fluctuations affect the inflation rate in Indonesia asymmetrically? |
| title_short | Do oil price fluctuations affect the inflation rate in Indonesia asymmetrically? |
| title_sort | do oil price fluctuations affect the inflation rate in indonesia asymmetrically? |
| url | http://psasir.upm.edu.my/id/eprint/101007/ http://psasir.upm.edu.my/id/eprint/101007/ http://psasir.upm.edu.my/id/eprint/101007/ |