Open AccessThe Asymmetric Effects of Oil Price Changes on the Economic Activities in Indonesia
Author(s) -
Rina Juliet Artami,
Yõnosuke Hara
Publication year - 2018
Publication title -
signifikan
Language(s) - English
Resource type - Journals
eISSN - 2476-9223
pISSN - 2087-2046
DOI - 10.15408/sjie.v7i1.6052
Subject(s) - economics , vector autoregression , oil price , inflation (cosmology) , monetary economics , gross domestic product , revenue , real gross domestic product , subsidy , econometrics , macroeconomics , market economy , theoretical physics , physics , accounting
This paper analyzes the asymmetric impact of oil price changes on the economic growth of and inflation in Indonesia by using the vector autoregression (VAR) model for the period from 1990Q1 to 2016Q4. The results show that the impact of oil price changes on the gross domestic product (GDP) is asymmetric, as a drop in oil prices decreases the GDP, whereas an increase in oil prices does not significantly affect GDP. It is crucial for Indonesia to reduce its dependency on oil, mainly as its primary source of revenue, and also consider utilizing more sources of renewable energy. At the same time, the effects of both the positive and negative changes in oil prices are found to be not statistically significant to inflation. The lack of impact of oil price changes on inflation can explain by the implementation of the fuel price subsidy in Indonesia.DOI: 10.15408/sjie.v7i1.6052