Consistent Evidence on Duration Dependence of Price Changes

This study investigates the impact of oil price variation on 14 industries in six markets, including Canada, China, France, India, the United Kingdom, and the United States. Panel weekly data were collected from June 1998 to December 2011. The results indicate that price fluctuations primarily affect the Oil and Gas as well as the Mining industries and have the least influence on the Food and Beverage industry. Furthermore, in three out of six of these countries (Canada, France, and the U.K.), oil price changes negatively affect the Pharmaceutical and Biotechnology industry. One possible reason for the negative relationship between oil price changes and the Pharmaceutical and Biotechnology industries in the above-mentioned countries is that the governments of these countries fund their healthcare systems. Portfolio managers and investors will find the results of this study useful because it enables adjusting portfolios based on knowledge of the industries that are impacted the most or the least by oil price fluctuations.

Download Full-text

DAMPAK VOLATILITAS HARGA MINYAK DI INDONESIA TERHADAP PENYESUAIAN KESEIMBANGAN FISKAL

Kajian Ekonomi dan Keuangan ◽

10.31685/kek.v15i2.91 ◽

2015 ◽

Vol 15 (2) ◽

pp. 37-52

Author(s):

Mahpud Sujai

Keyword(s):

Linear Trend ◽

The State ◽

Oil Price ◽

Output Gap ◽

State Budget ◽

Price Changes ◽

Potential Output ◽

Budget Cycle ◽

Actual Output ◽

The Impact

This paper is intended to analyze the effect of oil price changes on potential output and actual output in the state budget cycle and identifies the output gap which is the difference between potential output and actual output. The research methodology uses a quantitative approach to analyze problems that occur related to the impact of oil price changes to the state budget cycle. Data analysis was carried out through the approach cyclically adjusted fiscal balance with a simplified approach. This research identified that the potential output is likely to continue increasing in line with Indonesia's oil price trends which is continue to rise following the world oil price movements. In calculating the output gap using a linear trend and HP filter, the result is fuctuating depend on the percentage changes in both potential output and actual output. This paper concludes that Indonesian oil price (ICP) has a significant impact on changes in the state budget cycle. If oil prices rise, the output gap between potential output and actual output is greater, and vice versa. This will make the budget vulnerable to shock that occurs as an external infuence.

Download Full-text