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The Impact of Fuel Oil Price Fluctuations on Indonesia’s Macro Economic Condition

Author

Listed:
  • Akhmad Akhmad

    (Fakultas Ekonomi dan Bisnis, Universitas Muhammadiyah Makassar, Indonesia,)

  • Buyung Romadhoni

    (Fakultas Ekonomi dan Bisnis, Universitas Muhammadiyah Makassar, Indonesia,)

  • Kasnaeny Karim

    (Sekolah Tinggi Ilmu Manajemen Nitro Makassar, Indonesia,)

  • Muhammad Jibril Tajibu

    (Fakultas Ekonomi dan Bisnis, Universitas Hasanuddin, Indonesia,)

  • Muhammad Syukur

    (Fakultas Ilmu Sosial Universitas Negeri Makassar, Indonesia.)

Abstract

Since the beginning of the new order government up to now, Indonesia’s economic development constantly influences by fluctuation in fuel oil price. This paper aims to know the impact of fuel oil price change on economic growth, inflation, and poverty in Indonesia using Vector Auto Regression (VAR) method. Data used in the research are quarterly time series data for 1980-2017 period. The research result indicates that an increase in fuel oil price gives negative impact on Indonesia’s economy. Therefore, the government as well as all stakeholders needs to cooperate to reduce the negative impact of fuel oil price on economy.

Suggested Citation

  • Akhmad Akhmad & Buyung Romadhoni & Kasnaeny Karim & Muhammad Jibril Tajibu & Muhammad Syukur, 2019. "The Impact of Fuel Oil Price Fluctuations on Indonesia’s Macro Economic Condition," International Journal of Energy Economics and Policy, Econjournals, vol. 9(2), pages 277-282.
  • Handle: RePEc:eco:journ2:2019-02-32
    as

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    References listed on IDEAS

    as
    1. Hamilton, James D., 1996. "This is what happened to the oil price-macroeconomy relationship," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 215-220, October.
    2. Nizar, Muhammad Afdi, 2012. "Dampak Fluktuasi Harga Minyak Dunia Terhadap Perekonomian Indonesia
      [The Impact of World Oil Prices Fluctuation on Indonesia’s Economy]
      ," MPRA Paper 65601, University Library of Munich, Germany.
    3. Henriques, Irene & Sadorsky, Perry, 2011. "The effect of oil price volatility on strategic investment," Energy Economics, Elsevier, vol. 33(1), pages 79-87, January.
    4. Lardic, Sandrine & Mignon, Valérie, 2008. "Oil prices and economic activity: An asymmetric cointegration approach," Energy Economics, Elsevier, vol. 30(3), pages 847-855, May.
    5. Dartanto, Teguh, 2013. "Reducing fuel subsidies and the implication on fiscal balance and poverty in Indonesia: A simulation analysis," Energy Policy, Elsevier, vol. 58(C), pages 117-134.
    6. Cologni, Alessandro & Manera, Matteo, 2008. "Oil prices, inflation and interest rates in a structural cointegrated VAR model for the G-7 countries," Energy Economics, Elsevier, vol. 30(3), pages 856-888, May.
    7. Brown, Stephen P. A. & Yucel, Mine K., 2002. "Energy prices and aggregate economic activity: an interpretative survey," The Quarterly Review of Economics and Finance, Elsevier, vol. 42(2), pages 193-208.
    8. Lutz Kilian, 2008. "The Economic Effects of Energy Price Shocks," Journal of Economic Literature, American Economic Association, vol. 46(4), pages 871-909, December.
    9. Dogrul, H. Günsel & Soytas, Ugur, 2010. "Relationship between oil prices, interest rate, and unemployment: Evidence from an emerging market," Energy Economics, Elsevier, vol. 32(6), pages 1523-1528, November.
    10. Hamilton, James D, 1988. "A Neoclassical Model of Unemployment and the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 593-617, June.
    11. repec:eco:journ2:2018-05-6 is not listed on IDEAS
    12. repec:eco:journ2:2018-04-2 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Fuel Oil price; Economic Growth; Inflation; Poverty;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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