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An ARDL Approach on Crude Oil Price and Macroeconomic Variables

Author

Listed:
  • Seuk Wai, Phoong

    () (Faculty of Business and Accountancy, University of Malaya, Malaysia Author-2-Name: Seuk Yen, Phoong Author-2-Workplace-Name: Department of Mathematics, Faculty Science and Mathematics, Sultan Idris Education University, 35900 Tanjung Malim, Perak, Malaysia Author-3-Name: Author-3-Workplace-Name: Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)

Abstract

Objective – The removal of fuel subsidies by the Malaysian government in 2014 has been implement with the managed float system for fuel prices. Methodology/Technique – This study investigates the impact of the managed floating system of crude oil prices on the Malaysian economy using ARDL approach by looking at macroeconomic variables such as inflation, economic growth and unemployment rates. Findings – The results show that all of the variables have short lived relationship with oil prices whereby inflation and economic growth are positively related to oil prices. However, unemployment rate has a negative relationship with the changes of WTI crude oil prices. Novelty – The major input in the economy of Malaysia contributes to a positive relationship between inflation and oil prices, whilst the contribution of Malaysia being an oil-producing country results in the positive relationship of economic growth and oil price. Likewise, as oil prices are high, the increase in demand results in increase in job opportunities. Lastly, the correlation test shows that inflation and economic growth have a high positive correlation while unemployment rate has a low negative correlation with oil price. Type of Paper: Empirical.

Suggested Citation

  • Seuk Wai, Phoong, 2019. "An ARDL Approach on Crude Oil Price and Macroeconomic Variables," GATR Journals jber171, Global Academy of Training and Research (GATR) Enterprise.
  • Handle: RePEc:gtr:gatrjs:jber171
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    References listed on IDEAS

    as
    1. Abeysinghe, Tilak, 2001. "Estimation of direct and indirect impact of oil price on growth," Economics Letters, Elsevier, vol. 73(2), pages 147-153, November.
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    More about this item

    Keywords

    ARDL; Crude Oil Price; GDP; Inflation; Unemployment.;

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E39 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Other

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