An ARDL Approach on Crude Oil Price and Macroeconomic Variables

J. Bus. Econ. Review 4 (1) 68 – 73 (2019)

6 Pages Posted: 30 Apr 2019

See all articles by Seuk Wai Phoong

Seuk Wai Phoong

University of Malaya (UM)

Seuk Yen Phoong

Sultan Idris Education University - Faculty of Science and Mathematics

Date Written: March 15, 2019

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.

Keywords: ARDL; Crude Oil Price; GDP; Inflation; Unemployment

JEL Classification: E10, E30, E39

Suggested Citation

Phoong, Seuk Wai and Phoong, Seuk Yen, An ARDL Approach on Crude Oil Price and Macroeconomic Variables (March 15, 2019). J. Bus. Econ. Review 4 (1) 68 – 73 (2019), Available at SSRN: https://ssrn.com/abstract=3362406

Seuk Wai Phoong (Contact Author)

University of Malaya (UM) ( email )

Kuala Lumpur, 50603
Malaysia

Seuk Yen Phoong

Sultan Idris Education University - Faculty of Science and Mathematics

Malaysia

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