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Dynamic Causalities Between World Oil Price And Indonesia’S Cocoa Market: Evidence From The 2008 Global Financial Crisis And The 2011 European Debt Crisis

Author

Listed:
  • Mukhlis MUKHLIS

    (PhD Scholar in Economics, Faculty of Economics and Business, Universitas Syiah Kuala, Lecturer, Universitas Almuslim, Indonesia)

  • Raja MASBAR

    (Professor in Economics, Faculty of Economics and Business, Universitas Syiah Kuala, Indonesia)

  • Sofyan SYAHNUR

    (Senior Lecturer in Economics, Faculty of Economics Business, Universitas Syiah Kuala, Indonesia)

  • M. Shabri Abd. MAJID

    (Senior Lecturer in Economics, Faculty of Economics Business, Universitas Syiah Kuala, Indonesia, Corresponding author)

Abstract

This study examines and analyzes the short- and long-run dynamic causal relationship between the prices of Indonesian and world cocoa beans during the 2008 global financial crisis and the 2011 European debt crisis. Time series analysis consisting of cointegration, Vector Error Correction Model (VECM) and Granger causality are used to test long-run equilibrium, short- and long-run relationships, and dynamic causalities between the Indonesian cocoa and world cooa prices. The study found a long-run equilibrium between Indonesian cocoa price, world cocoa price, exchange rate, and world oil price. The Indonesian and world cocoa markets have a mutually influential relationship. However, an inefficient transmission of corrective adjustments in the Indonesian cocoa prices was documented over the study period. The exchange rate consistently affected Indonesian cocoa prices, while fluctuations in world oil prices were independent to domestic and world cocoa markets over the study period. Overall, the study documented a long-run equilibrium between Indonesian and global cocoa markets at the different level of speed of adjustment of the world cocoa price towards long-run equilibrium between the two economic crises. The Indonesian government needs to enhance international trade cooperation and pricing policy harmonization among cocoa producing- and importing-countries.

Suggested Citation

  • Mukhlis MUKHLIS & Raja MASBAR & Sofyan SYAHNUR & M. Shabri Abd. MAJID, 2020. "Dynamic Causalities Between World Oil Price And Indonesia’S Cocoa Market: Evidence From The 2008 Global Financial Crisis And The 2011 European Debt Crisis," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(2), pages 217-233, June.
    • Handle: RePEc:hrs:journl:v:xii:y:2020:i:2:p:217-233
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    Cited by:

    1. Imade Yoga PRASADA & Aura DHAMIRA & Agus Dwi NUGROHO, 2021. "Effects Of Climatic Factors On The Productivity Of Smallholder Rubber Plantations In South Sumatra, Indonesia," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(2), pages 109-121, June.
    2. Ridha, Ahmad & Masbar, Raja & Aliasuddin & Silvia, Vivi, 2022. "Asymmetric Price Transmission in the Cocoa Supply Chain in Indonesia," Economia agro-alimentare / Food Economy, Italian Society of Agri-food Economics/Società Italiana di Economia Agro-Alimentare (SIEA), vol. 24(1), May.
    3. Ahmad Ridha & Raja Masbar & Aliasuddin Aliasuddin & Vivi Silvia, 2022. "Asymmetric Price Transmission in the Cocoa Supply Chain in Indonesia," Economia agro-alimentare, FrancoAngeli Editore, vol. 24(1), pages 1-21.
    4. Kamaruddin Kamaruddin & Yusri Hazmi & Raja Masbar & Sofyan Syahnur & M. Shabri Abd. Majid, 2021. "Asymmetric Impact of World Oil Prices on Marketing Margins: Application of NARDL Model for the Indonesian Coffee," International Journal of Energy Economics and Policy, Econjournals, vol. 11(6), pages 212-220.

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    More about this item

    Keywords

    Cocoa price; Exchange rate; Oil price; World cocoa market; Economic crisis;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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