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Do macroeconomic activities respond differently to oil price shocks? New evidence from Indonesia

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  • Baek, Jungho
  • Yoon, Jee Hee

Abstract

The contribution of the present article is to explicitly consider the role of supply and demand shocks in the global oil market when analyzing the nexus between oil price fluctuations and macroeconomic activities – growth, inflation, and exchange rate – in an emerging economy, specifically Indonesia. For doing this, a structural vector autoregressive (SVAR) methodology is applied to monthly observations for 1998 through 2019. We show that the timing, magnitude, and even direction of the response of Indonesia’s macroeconomy are likely to vary depending on the type of shock. We believe that this discovery provides important implications for empirical modeling and policy analysis.

Suggested Citation

  • Baek, Jungho & Yoon, Jee Hee, 2022. "Do macroeconomic activities respond differently to oil price shocks? New evidence from Indonesia," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 852-862.
    • Handle: RePEc:eee:ecanpo:v:76:y:2022:i:c:p:852-862
    DOI: 10.1016/j.eap.2022.09.023
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    Cited by:

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    3. Ayaz Zeynalov & Kristina Tiron, 2022. "Macroeconomic performance of oil price shocks in Russia," Papers 2211.04954, arXiv.org, revised Nov 2022.
    4. Aharon, David Y. & Azman Aziz, Mukhriz Izraf & Kallir, Ido, 2023. "Oil price shocks and inflation: A cross-national examination in the ASEAN5+3 countries," Resources Policy, Elsevier, vol. 82(C).
    5. AlGhazali, Abdullah & Belghouthi, Houssem Eddine & Mensi, Walid & Mclver, Ron & Kang, Sang Hoon, 2024. "Oil price shocks, sustainability index, and green bond market spillovers and connectedness during bear and bull market conditions," Economic Analysis and Policy, Elsevier, vol. 84(C), pages 1470-1489.
    6. Jungho Baek, 2022. "A Note on Oil Price Shocks," Commodities, MDPI, vol. 1(2), pages 1-2, December.
    7. Yildirim, Zekeriya & Guloglu, Hasan, 2024. "Macro-financial transmission of global oil shocks to BRIC countries — International financial (uncertainty) conditions matter," Energy, Elsevier, vol. 306(C).
    8. Yushi Xu & Baifan Chen & Jionghao Huang & Qingsha Hu & Shuning Kong, 2024. "Time–frequency connectedness between heterogeneous oil price shocks and inflation: a comparative analysis of developed and emerging economies," Economic Change and Restructuring, Springer, vol. 57(6), pages 1-42, December.

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    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
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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