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Do Various Sectors Respond to Oil Price Shocks? New Evidence for Indonesia as Emerging Market

Author

Listed:
  • Subiakto Sukarno

    (Bandung Institute of Technology (Institut Teknologi Bandung), Bandung, Indonesia.)

  • Marla Setiawati

    (Bandung Institute of Technology (Institut Teknologi Bandung), Bandung, Indonesia.)

Abstract

Oil is one of the world's most widely used factor inputs in the manufacture of goods and services. Generally speaking, we believe that oil-dependent sectors will be more sensitive to shocks in oil prices. This paper aims to evaluate the response of different sectors as an emerging market to oil price shocks in Indonesia. The monthly data is used from January 2000 to February 2019. This study uses the Vector Auto-Regressive (VAR) model and the Impulse Reaction Function looks in-depth. The results show that shocks in oil prices can be significantly negative or positive for Indonesia's various sectors. First, we find that all Indonesia's sector index has the significant impact of oil price shocks. Second, the positive impact comes from the mining sector, while the remaining industries have a negative impact due to shocks in oil prices. The practical implications of this research are very useful not only to see the impact of Indonesia's role as an emerging market and net oil importer which is for the investor in the mining area but also to others sector and regulators.

Suggested Citation

  • Subiakto Sukarno & Marla Setiawati, 2020. "Do Various Sectors Respond to Oil Price Shocks? New Evidence for Indonesia as Emerging Market," International Journal of Energy Economics and Policy, Econjournals, vol. 10(4), pages 371-376.
    • Handle: RePEc:eco:journ2:2020-04-46
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    References listed on IDEAS

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    Cited by:

    1. Velip Suraj Pavto & Guntur Anjana Raju, 2020. "Linkages between Oil Sectors Returns of Asian Emerging Stock Markets: Unearthing the Hidden Opportunity for Portfolio Diversification," International Journal of Energy Economics and Policy, Econjournals, vol. 10(6), pages 152-156.

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    More about this item

    Keywords

    Oil prices shocks; Vector Auto-Regressive Model; Impulse Reaction Function;
    All these keywords.

    JEL classification:

    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics

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