Goh, Lim Thye and Law, Siong Hook and Trinugroho, Irwan (2022) Do oil price fluctuations affect the inflation rate in Indonesia asymmetrically? Singapore Economic Review, 67 (04). pp. 1333-1353. ISSN 0217-5908, DOI https://doi.org/10.1142/S0217590820460030.
Full text not available from this repository.Abstract
Changes in the oil price directly affect production costs, and subsequently, the general price level of products. With Indonesia observing an inflation targeting policy, this study applies the nonlinear autoregressive distributed lag (NARDL) technique to investigate the effect of oil price fluctuations in Indonesia. The relationship is important for the central bank to gauge the effectiveness of the inflation targeting policy in immunizing the country from oil price fluctuations. Our findings have revealed that there was an asymmetric behavior between oil price and the inflation rate (producer price index), thus questioning the effectiveness of the inflation targeting policy. More specifically, in the long run, an increase in the oil price will tend to lead to an increase in the rate of inflation with a greater deviation, while an oil price reduction will lead to a decrease in the inflation rate with a lower deviation. This suggests that the benefits of an oil price reduction are not passed down to the consumer.
| Item Type: | Article |
|---|---|
| Funders: | None |
| Uncontrolled Keywords: | Inflation targeting; Oil price; Asymmetric cointegration; Indonesia |
| Subjects: | H Social Sciences > HG Finance |
| Divisions: | Faculty of Business and Economics |
| Depositing User: | Ms. Juhaida Abd Rahim |
| Date Deposited: | 19 Nov 2023 07:44 |
| Last Modified: | 03 Dec 2023 01:53 |
| URI: | http://eprints.um.edu.my/id/eprint/41953 |
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