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Oil Price Shocks and Sectoral Outputs: Empirical Evidence from Malaysia

Author

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  • Venus khim-sen Liew

    (Universiti Malaysia Sarawak)

  • Arunnan Balasubramaniam

    (Universiti Tunku Abdul Rahman)

Abstract

This article examines the oil price-output nexus for the case of Malaysia between the years 1970 to 2014. Autoregressive Distributed Lag (ARDL) modeling approach is adopted to investigate long-run relationships among oil-price and real aggregate GDP as well as the real outputs of agriculture, manufacturing, industrial and service sectors. The outcomes of linear ARDL cointegration analysis fails to reveal any long-run relationship among the variables. Subsequently, all models are re-estimated by deploying the nonlinear ARDL approach to cointegration. The evidence of nonlinear long-run relationship is found for oil price and the Malaysian manufacturing and industrial outputs. Notably, the long-run parameter estimates reveal that oil price increase enhances outputs significantly, whereas oil price decrease has significant negative impact on these two sectoral outputs. It is suggested in this article that policy-makers need to consider the nonlinear effect of oil price shocks to formulate policy which is able to maintain favorable environment that enhances economic growth.

Suggested Citation

  • Venus khim-sen Liew & Arunnan Balasubramaniam, 2017. "Oil Price Shocks and Sectoral Outputs: Empirical Evidence from Malaysia," Economics Bulletin, AccessEcon, vol. 37(1), pages 38-47.
    • Handle: RePEc:ebl:ecbull:eb-16-00598
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    Cited by:

    1. Edo, Samson & Osadolor, Nneka Esther & Dading, Isuwa Festus, 2020. "Growing external debt and declining export: The concurrent impediments in economic growth of Sub-Saharan African countries," International Economics, Elsevier, vol. 161(C), pages 173-187.
    2. Léleng Kebalo, 2020. "Effects of oil price shocks on economic sectors of net oil-importing countries: case of Togo," Economics Bulletin, AccessEcon, vol. 40(4), pages 2689-2703.
    3. Léleng Kebalo, 2020. "Effects of oil price shocks on economic sectors of net oil-importing countries: case of Togo," Post-Print hal-03157689, HAL.
    4. Woo, Chiew Eng & Kun, Sek Siok, 2019. "Examining Asymmetric Oil Price Exposure to Assets Return in Malaysia: A Nonlinear ARDL Approach," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 53(3), pages 23-41.

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    More about this item

    Keywords

    Oil price shocks; outputs; ARDL; Malaysia; asymmetrical behaviour; nonlinear;
    All these keywords.

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General

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