Oil price and Indonesian economic growth

  • 1704 Views
  • 220 Downloads

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License

Oil prices and economic growth are important indicators to see the success of Indonesia’s development performance. The use of oil as the world’s main energy source in general and Indonesia in particular is driven by industrialization. The more industries, the greater the energy resources needed. In the same context, economic growth will also increase oil demand. The purpose of this study is to examine and create empirical evidence of the relationship between world oil prices and economic growth towards domestic oil prices. Furthermore, to test and create empirical evidence on the relationship of domestic oil prices, agriculture, trade, investment, inflation, interest rates, industry, labor, exchange rates and balance of payments to economic growth. The expected output of this research will be to provide information on the policy of the transmission mechanism of oil prices and economic growth in Indonesia. The method used is descriptive and econometric approach to the analysis of simultaneous equation models with two stages of the least squares method. The results of the study indicate that there is a simultaneous relationship between oil prices and economic growth. Economic growth, world oil prices and domestic oil prices a year ago had a positive effect on domestic oil prices. The second result shows that domestic oil, agriculture, investment, interest rates, industry, exchange rates, balance of payments and economic growth in the previous year have a positive effect on economic growth, while trade, inflation and labor have a negative influence on economic growth.

view full abstract hide full abstract
    • Table 1. Hausman test for domestic oil prices
    • Table 2. Hausman economic growth test
    • Table 3. Simultaneous equations of economic growth
    • Table 4. Simultaneous equations of domestic oil prices
    • Abdullah, N., & Young, T. (2017). Profitability of Commercial Banks Revisited: New Evidence From Oil And Non-Oil Exporting Countries in the Mena Region. Investment Management and Financial Innovations, 14(3), 62-73.
    • Alley, I., Asekomeh, A., & Mobolaji, H. (2014). Oil Price Shocks and Nigerian Economic Growth. European Scientific Journal, 10(19), 375-391.
    • Al-Sahlawi, M. A., & Fahd, K. (2013). Data Mining Application in Forecasting the Demand for Oil in Saudi Arabia. The Journal of American Business Review, 2(1), 308-314.
    • Badan Pusat Statistik (BPS) (n.d.). Official Web Site.
    • Badan Pusat Statistik (n.d.). Official Web Site.
    • Bank Indonesia (BI) (n.d.). Official Web Site.
    • Bappenas (1999). Bab II. Pokok-Pokok Reformasi Pembangunan dalam Rangka Penyelematan dan Normalisasi Kehidupan Nasional. Jakarta.
    • British Petroleum (BP) (2017). Statistical Review of World Energy.
    • Conrad, J. M. (2003). Resources Economics. New York: Cambridge University Press.
    • Daeng, S. (2016). Seperti Ini Dampak Serius Penurunan Harga Minyak Dunia.
    • Garba, S. A. (2013). Regression Test of Independence of the Impact of Pertoleum Industry on the Agricultural Sector in Nigeria (1972-2009). Kuwait Chapter of Arabian Journal of Business and Management Review, 2(6), 31-38.
    • Greene, William H. (2012). Econometric Analysis (7th ed.). Prentice Hill.
    • Gujarati, Damodar N. (2003). Basic Econometrics (4th ed.). McGraw-Hill.
    • Ibrahim, M. J. (2008). Growth Prospects of Oil and Gas Abundant Economies: the Nigerian experience (1970-2000). Journal of Economic Studies, 35(2), 170-190.
    • Islam, R., Ahmad, B. A. G., Irwanshah, Z. A., & Jeya, M. R. (2017). Impact on Poverty and Income Inequality in Malaysia’s Economic Growth. Problems and Perspectives in Management, 15(1), 55-62.
    • Jones, D. W., Leiby, P. N., & Paik, I. K. (2004). Oil Price Shocks and the Macroeconomy: What Has Been Learned Since 1996. The Energy Journal, 25(2), 1-32.
    • Judge, Hill (1985). The Theory and Practice of Econometrics. New York, United States: John Wiley and Sons Ltd.
    • Kareem, S. D., Kari, F., Alam, G. M., Makua, C. G. O., & David, M. O. (2012). Foreign Direct Investment into Oil Sector and Economic Growth in Nigeria. The International Journal of Applied Economics and Finance, 6(4), 127-135.
    • Kareem, S. D., Kari, F., Alam, G. M., Makua, C. G. O., David, M. O., & Oke, O. K. (2012). Foreign Direct Investment and Environmental Degradation of Oil Exploitation: The Experience of Niger Delta. The International Journal of Applied Economics and Finance, 6(4), 117-126.
    • Karikari, J. A., Agbara, G., Dezhbakhsh, H., & El-Osta, B. (2007). The Impact of Mergers in U.S. Petroleum Industry on Wholesale Gasoline Prices. Contemporary Economic Policy, 25(1), 46-56.
    • McCafferty, Stephen (1990). Macroeconomic Theory. New York: Harper & Row Publishers.
    • MigasReview (n.d.). Official Web Site.
    • Mustika dkk (2015). Pengaruh Ekspor dan Impor Minyak Bumi terhadap pertumbuhan Ekonomi Indonesia. Jurnal Perspektif Pembiayaan dan Pembangunan Daerah, 2(3), 107-118.
    • Nuafalfatih (2017). Teori Pertumbuhan.
    • Peach, J., & Starbuck, C. M. (2011). Oil and Gas Production and Economic Growth in New Mexico. Journal of Economic Issues, XLV(2), 511-526.
    • Sabir, M., & Malik, Q. A. (2012). Determinants of Capital Structure – A Study of Oil and Gas Sector of Pakistan. Interdisciplinary Journal of Contemporary Research in Business, 3(10), 395-400.
    • Tjahjaprijadi, C. (2014). Analisis Dampak Perubahan Harga Minyak Internasional Terhadap Pertumbuhan Ekonomi Indonesia.
    • UU Nomor 22 Tahun 2001, about Oil and Gas.
    • Ying, Q., & Yan, H. (2007). DIY or 3PL: Study on the Third Party Logistics of Petroleum Producing Industry of China. The Business Review, 7(3), 291-296.
    • Yusuf, M. (2015). An analysis of the impact of oil price shocks on the growth of the Nigerian economy: 1970-2011. African Journal of Business Management, 9(3), 103-115.
Related Articles

  • Impact on poverty and income inequality in Malaysia’s economic growth

    Rabiul IslamORCID Researcher ID, Ahmad Bashawir Abdul Ghani , Irwanshah Zainal Abidin , Jeya Malar Rayaiappan doi: http://dx.doi.org/10.21511/ppm.15(1).2017.05
    Problems and Perspectives in Management Volume 15, 2017         Issue #1         pp. 55-62 Views: 12037 Downloads: 5745 TO CITE АНОТАЦІЯ

    Poverty and income inequality are extreme issues that still exist in Malaysia. Any rise in poverty and income inequality definitely affect economic growth. There are many great efforts taken by the government of Malaysia to eradicate poverty and to reduce the gap of income inequality which occurs since 1970’s. The incidence of poverty and income inequality is higher in rural areas compared to urban areas. This paper is mainly to study the level of poverty and income inequality in Malaysia together with government intervention to develop Malaysia’s economic growth. The research is focused among the working people at Ipoh, Perak. In this paper, questionnaire forms are being distributed to get information regarding the issue of poverty and income inequality. It also looks into the strategies taken by the government of Malaysia to eradicate poverty and income inequality. Few recommendations are given in terms of education policy, financial aid and assistance from government and non-government organization (NGO) to upgrade the standard and quality of living among the poor and lower-income group of people.

  • Impact of inflation on economic growth: evidence from Nigeria

    Anthony Olugbenga AdaramolaORCID , Oluwabunmi Dada doi: http://dx.doi.org/10.21511/imfi.17(2).2020.01
    Investment Management and Financial Innovations Volume 17, 2020         Issue #2         pp. 1-13 Views: 9346 Downloads: 5624 TO CITE АНОТАЦІЯ

    In an attempt to examine the influence of inflation on the growth prospects of the Nigerian economy, the study employs the autoregressive distributed lag on the selected variables, i.e. real gross domestic product (GDP), inflation rate, interest rate, exchange rate, degree of economy`s openness, money supply, and government consumption expenditures for the period 1980–2018. The study findings indicate that inflation and real exchange rate exert a significant negative impact on economic growth, while interest rate and money supply indicate a positive and significant impact on economic growth. Other variables in the model depict no influence on the economic growth of Nigeria. The causality result shows the unidirectional relationships between interest rate, exchange rate, government consumption expenditures and gross domestic product. However, inflation and the degree of openness show no causal relationship with gross domestic product. As a result, the study recommends that a more pragmatic effort is needed by the monetary authorities to target the inflation vigorously to prevent its adverse effect by ensuring a tolerable rate that would stimulate the economic growth of Nigeria.

  • Formalization of the impact of imbalances in the movement of financial resources on economic growth of countries in Central and Eastern Europe

    Serhiy KozmenkoORCID , Maxim KorneyevORCID Researcher ID doi: http://dx.doi.org/10.21511/afc.01(1).2017.06
    Accounting and Financial Control Volume 1, 2017         Issue #1         pp. 48-58 Views: 7973 Downloads: 1381 TO CITE

    The article deals with the impact of financialization on economic growth in countries of Central and Eastern Europe. It determinesthe impact of imbalances in the movement of financial resources caused by financialization on economic growth of these countries. It proves that the implementation of measures aimed at increasing the openness of the economy and maintaining solvent demand have a positive impact on economic growth of the surveyed countries in the long run. It also proves the importance of developing a set of measures of strategic nature regulating imbalances in the movement of financial resources caused by financialization.

Download Preview
Close
Problems and Perspectives in Management
Problems and Perspectives in Management