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Jurnal Ekonomi Malaysia

55 (2) 2021 121 – 135

The Effect of Asymmetrical Relationship of Oil Price Shocks on Gross Domestic Product

School of Economics, Finance and Banking
Universiti Utara Malaysia
06010 UUM Sintok, Kedah
MALAYSIA.

z.zalina@uum.edu.my

School of Economics, Finance and Banking
Universiti Utara Malaysia
06010 UUM Sintok, Kedah
MALAYSIA.

mukhriz@uum.edu.my

School of Economics, Finance and Banking
Universiti Utara Malaysia
06010 UUM Sintok, Kedah
MALAYSIA.

fais908@uum.edu.my

Abstract

This paper revisits the asymmetrical crude oil prices-Gross Domestic Product (GDP) relationship for Malaysia and Indonesia using Hansen (2000) Threshold regression method. The empirical analysis uses quarterly data for the period of 1990 (quarter 1) until 2018 (quarter 1).  The paper confirms the nonlinearities in the oil price-GDP relationship for Malaysia and Indonesia. The findings reveal that when oil prices are below USD37, oil price shocks have a negative impact on Malaysian GDP, but positively affect GDP when oil price are between USD37 to USD55. Indonesia’s GDP, on the other hand, responds favourably to changes in oil prices when they are below USD47, but negatively affects GDP when oil price exceeds USD47. Both countries’ GDP responses to oil price shocks are linked to the issues such as the degree of oil dependency, oil self-sufficiency, and government efficiency in managing revenue from the oil sector and the ease with which critical policy adjustments take place.

Keywords

asymmetric; Crude oil price; GDP; nonlinear; threshold value

JEL Codes

B27, C24, C32, F41
http://dx.doi.org/10.17576/JEM-2021-5502-10
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Zalina Zainal, , Aziz, , & Md. Salleh, (2021). The Effect of Asymmetrical Relationship of Oil Price Shocks on Gross Domestic Product. Jurnal Ekonomi Malaysia, 55(2), 121–135. http://dx.doi.org/10.17576/JEM-2021-5502-10

@article{zainal2021effect,
  title={The Effect of Asymmetrical Relationship of Oil Price Shocks on Gross Domestic Product},
  author={Zalina Zainal, Zalina and Aziz, Mukhriz Izraf Azman and Md. Salleh, Mohd Faisol},
  journal={Jurnal Ekonomi Malaysia},
  volume={55},
  number={2},
  pages={121—135},
 

year={2021},
}

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