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Does Indonesia As The World Largest Palm Oil Producing Country Determine The World Crude Palm Oil Price Volatility?

Author

Listed:
  • SYAHRIL

    (Ph.D. Scholar in Economics, Universitas Syiah Kuala, Indonesia, and Lecturer of the Faculty of Economics and Business, Universitas Teuku Umar (UTU), Indonesia)

  • Raja MASBAR

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

  • M. Shabri Abd. MAJID

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

  • Sofyan SYAHNUR

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

Abstract

This study contributes to the existing literature on the current phenomena of a higher level of world palm oil volatility by exploring the bivariate causal relationship between Indonesian and Malaysian CPO exports, the world crude and soybean oils, exchange rate, and the world CPO price volatility using the bivariate Granger causality analysis. It also attempts to explore the extent to which shocks in these variables influenced the world CPO price volatility using the impulse response functions and variance decomposition analyses over the period from January 2008 to December 2017. The study found that the world CPO price volatility is mainly Granger-caused by the changes in the real exchange rate. The Indonesian CPO export only found to have a bidirectional Granger causal relationship with the Malaysian CPO export, while the Malaysian CPO exports are Granger-caused by the world CPO price volatility, world crude oil price, and world soybean oil price. Our findings suggested that macroeconomic policy harmonization on the CPO price and production as well as exchange rate policy should be innovatively designed between Indonesia and Malaysia through the existing Council of Palm Oil Producing Countries (CPOPC) if these counties intend to gain more revenue from their CPO exports in the future.

Suggested Citation

  • SYAHRIL & Raja MASBAR & M. Shabri Abd. MAJID & Sofyan SYAHNUR, 2019. "Does Indonesia As The World Largest Palm Oil Producing Country Determine The World Crude Palm Oil Price Volatility?," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(2), pages 93-104, June.
    • Handle: RePEc:hrs:journl:v:xi:y:2019:i:2:p:93-104
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    File URL: http://www.rsijournal.eu/ARTICLES/June_2019/SI/9.pdf
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    Citations

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    Cited by:

    1. Oleg ANDREEV & Oksana LOMAKINA & Ariadna ALEKSANDROVA, 2021. "Diversification Of Structural And Crisis Risks In The Energy Sector Of The Asean Member Countries," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(2), pages 149-160, June.
    2. 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.
    3. E. ERNAWATI & Raja MASBAR & M. Shabri Abd. MAJID & Abd. JAMAL, 2021. "Production And Marketing Efficiency Of Patchouli Oil Industry In Indonesia," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(2), pages 135-148, June.
    4. Siti Afni ANISAH & Lestari Rahayu WALUYATI & Agus Dwi NUGROHO, 2021. "Could A New Agricultural Auction Market Implement A Good Marketing Mix?," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(2), pages 181-191, June.

    More about this item

    Keywords

    Dynamic causality; World CPO price volatility; World commodity markets; Macroeconomic policy harmonization; International CPO trade;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade
    • Q37 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Issues in International Trade

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