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Relationship between oil price and gross fixed capital formation: Malaysian case

Author

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  • Ali, Ariffhidayat
  • Masih, Mansur

Abstract

The aim of this paper is to investigate the lead-lag relation between oil price and gross fixed capital formation in an economy incorporating some other relevant macroeconomic variables such as, money supply and exchange rate. The standard time series techniques are used for the analysis. Malaysia is taken as a case study. The variables are bound together by a theoretical relation as evidenced in their being cointegrated. The generalized variance decomposition analysis tends to indicate that oil price is the most exogenous variable leading all other variables including gross fixed capital formation. The findings contain strong policy implications for the emerging economies like Malaysia.

Suggested Citation

  • Ali, Ariffhidayat & Masih, Mansur, 2017. "Relationship between oil price and gross fixed capital formation: Malaysian case," MPRA Paper 110266, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:110266
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    oil price; gross fixed capital formation; VECM; VDC; Malaysia;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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