scholarly journals PANEL COINTEGRATION ANALYSIS IN DETERMINING RELATIONSHIP OF AGRICULTURAL COMMODITY AND OIL FUEL PRICE IN INDONESIA

2020 ◽  
Vol 4 (2) ◽  
pp. 341-358
Author(s):  
Marizsa Herlina
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Palm Oil ◽  
Commodity Prices ◽  
Panel Cointegration ◽  
Oil Prices ◽  
Agricultural Commodity ◽  
Fuel Prices ◽  
Long Run ◽  
Oil Fuel

This paper contributes to explain the relationship between oil fuel prices, oil price, the exchange rates, and agricultural commodity prices in Indonesia by using panel cointegration. Thus, this paper studied the short- and long-run relationships between oil fuel prices, oil prices, exchange rates, and agricultural commodity prices using the panel cointegration and causality analysis on five main agricultural commodities in Indonesia (i.e. rice, beef, palm oil, red chili, and sugar). The study was conducted using weekly agricultural, oil fuel, oil prices, and exchange rates from October 2014 until May 2016. The results showed that the oil fuel prices and the exchange rate had a long-run impact on agricultural commodity prices. The direction of the causality had also been determined. The oil fuel prices, oil prices, and exchange rate altogether had a unidirectional Granger causality to all of the agricultural commodity prices except beef and palm oil prices in the long-run.

PALM OIL PRICE–EXCHANGE RATE NEXUS IN INDONESIA AND MALAYSIA

2021 ◽  
Vol 24 (2) ◽  
pp. 169-180
Author(s):  
Afees Salisu ◽  
Abdulsalam Abidemi Sikiru
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Palm Oil ◽  
Commodity Prices ◽  
Oil Price ◽  
Future Research ◽  
Daily Data ◽  
Out Of Sample ◽  
Exchange Rate Movements ◽  
Predictive Content

In this study, we extend the literature analyzing the predictive content of commodity prices for exchange rates by examining the role of palm oil price. Our analysis focuses on Indonesia and Malaysia, the two top producers and exporters of palm oil, and utilizes daily data covering the period from December 12, 2011 to March 29, 2021, which is partitioned into two sub-samples based on the COVID-19 pandemic. Relying on a methodology that accommodates some salient features of the variables of interest, we find that on average the in-sample predictability of palm oil price for exchange rate movements is stronger for Indonesia than for Malaysia. While Indonesia’s exchange rate appreciates due to a rise in palm oil price regardless of the choice of predictive model, Malaysia’s exchange rate only appreciates after adjusting for oil price. However, both exchange rates do not seem to be resilient to the COVID-19 pandemic as they depreciate amidst dwindling palm oil price. Similar outcomes are observed for the out-of-sample predictability analysis. We highlight avenues for future research and the implications of our results for portfolio diversification strategies.

scholarly journals Test for asymmetry on the ex-pump price of premium gasoline in Ghana, Kenya, and Colombia

2021 ◽  
Vol 4 (1) ◽  
pp. 73-89
Author(s):  
Senanu Kwasi Klutse ◽  
Gábor Dávid Kiss
Keyword(s):  
Exchange Rate ◽  
Crude Oil ◽  
Oil Prices ◽  
Oil Price ◽  
Dollar Exchange Rate ◽  
Fuel Prices ◽  
Crude Oil Prices ◽  
Long Run ◽  
The Us ◽  
Us Dollar

Once again, the World has been faced with an oil price shock as a result of the SARS-CoV-2 coronavirus pandemic. This has resurrected an old debate of whether retail fuel prices adjust significantly to either increases or decreases in international crude oil prices. With many countries moving towards the deregulation of their petroleum sub-sector, the impact of the US dollar exchange rate on retail fuel prices cannot be overlooked. This study investigates the rate at which positive and negative changes in international Brent crude oil prices and the US dollar exchange rate affected the increases or decreases in the ex-pump price of premium gasoline between February 2012 and December 2019. Using a non-linear auto-regressive distributed lag model, the exchange rate was found to play a significant role in fluctuations in the retail price of premium gasoline in Ghana and Colombia in the long run, howev-er, the rate of adjustment between the negative and positive changes was not significant, dispelling the perception of price asymmetry. There was no significant relationship between the ex-pump price of premium gasoline and the international Brent crude oil price in Ghana and Kenya in the long run. This study recommends that the aforementioned countries prioritise the creation of ex-change rate buffers to prevent exchange rate shocks that may affect retail fuel prices.

scholarly journals The Long-run Relationship between Real Exchange Rate and Real Interest Rate in Asian Countries: An Application of Panel Cointegration

2001 ◽  
Vol 40 (4II) ◽  
pp. 577-602 ◽  
Author(s):  
Shaista Alam ◽  
Muhammad Sabihuddin Butt ◽  
Azhar Iqbal
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Exchange Rates ◽  
Real Exchange Rate ◽  
Real Interest Rate ◽  
Real Exchange Rates ◽  
Panel Cointegration ◽  
The Real ◽  
Long Run ◽  
Interest Rate Differentials

The role of exchange rate policy in economic development has been the subject of much debate and controversy in the development literature. Interest rates and exchange rates are usually viewed as important in the transmission of monetary impulses to the real economy. In the short run the standard view of academics and policy-makers is that a monetary expansion lowers the interest rate and rises the exchange rate, with these price changes then affecting the level and composition of aggregate demand. Frequently, these influences are described as the liquidity effects of monetary expansion, viewed as the joint effect of providing larger quantities of money to the private sector. Popular theories of exchange-rate determination also predict a link between real exchange rates and real interest rate differentials. These theories combine the uncovered interest parity relationship with the assumption that the real exchange rate deviates from its long-run level only temporarily. Under these assumptions, shocks to the real exchange rate—which are often viewed as caused by shocks to monetary policy—are expected to reverse themselves over time. This study investigates the long-run relationship between real exchange rates and real interest rate differentials using recently developed panel cointegration technique. Although this kind of relationship has been studied by a number of researchers,1 very little evidence in support of the relationship has been reported in the case of developing countries. For example, Meese and Rogoff (1988) and Edison and Pauls (1993), among others, used the Engle-Granger cointegration method and fail to establish a clear long-run relationship in their analysis.

scholarly journals The Exchange Rate Volatility in Indonesia and Policy Response

2014 ◽  
Author(s):  
Ferry Syarifuddin
Keyword(s):  
Exchange Rate ◽  
Central Bank ◽  
Exchange Rates ◽  
Interest Rates ◽  
Foreign Exchange ◽  
Exchange Rate Volatility ◽  
Commodity Prices ◽  
Policy Response ◽  
Long Run ◽  
The Exchange Rate

High fluctuation of exchange rate in short horizon is obviously making economic activity more risky as uncertainty rises. Moreover, volatile exchange rates also make commodity prices, interest rates and a host of other variables more volatile as well. Although changes in long-run exchange rates tend to undergo relatively gradual shifts, in the shorter horizon, the exchange rate might be very volatile. Then there should be a systematic and measured policy to mitigate the foreign exchange fluctuations and to minimize the fluctuations as well as to drive it to its fundamental value. In this part, USD/IDR volatility is investigated using GARCH approach. The results reveal that, USD/IDR volatility in Indonesia is persistent. On the other hand, the following studies also present the outcomes of effectiveness of policy response by the Central Bank. Foreign-exchange sale interventions by the Central Bank lead conditional volatility of the USD/IDR to decrease slightly.

Monetary model of exchange rate determination under floating and non-floating regimes

2019 ◽  
Vol 9 (2) ◽  
pp. 254-283 ◽  
Author(s):  
Oyakhilome Wallace Ibhagui
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Exchange Rate Regimes ◽  
Panel Cointegration ◽  
Nominal Exchange Rate ◽  
Sub Saharan Africa ◽  
Content Type ◽  
Vector Autoregressive ◽  
Long Run ◽  
The Impact

Purpose The purpose of this paper is to empirically analyse how different exchange rate regimes affect the links between monetary fundamentals and exchange rates in Sub-Saharan Africa. Design/methodology/approach Using the Pedroni method for panel cointegration, mean group and pooled mean group and the panel vector autoregressive technique, this study empirically investigates whether monetary fundamentals impact exchange rates similarly in both regimes. Thus, the author acquires needed and credible empirical data. Findings The result suggests that the impact is dissimilar. In the floating regime, an increase in relative money supply and relative real output depreciates and appreciates the nominal exchange rate in the long run whereas in the non-floating regime, the evidence is mixed. Thus, exchange rates bear a theoretically consistent relationship with monetary fundamentals across SSA countries with floating regimes but fails under non-floating regimes. This provides evidence that regime choice is important if the relationship between monetary fundamentals and exchange rates in SSA are to be theoretically consistent. Originality/value This study empirically incorporates the dissimilarities in exchange rate regimes in a panel framework and study the links between exchange rates and monetary fundamentals. The focus on how exchange rate regimes might alter the equilibrium relationships between exchange rates and monetary fundamentals in SSA is a pioneering experiment.

Impact of exchange rate and oil price on the yield of sovereign bond and sukuk: Evidence from Malaysian capital market

2017 ◽  
Vol 5 (4) ◽  
pp. 27
Author(s):  
Huda Arshad ◽  
Ruhaini Muda ◽  
Ismah Osman
Keyword(s):  
Exchange Rate ◽  
Capital Market ◽  
Time Series Data ◽  
Oil Prices ◽  
Oil Price ◽  
Series Data ◽  
Sovereign Bond ◽  
Long Run ◽  
Short Run ◽  
The Impact

This study analyses the impact of exchange rate and oil prices on the yield of sovereign bond and sukuk for Malaysian capital market. This study aims to ascertain the effect of weakening Malaysian Ringgit and declining of crude oil price on the fixed income investors in the emerging capital market. This study utilises daily time series data of Malaysian exchange rate, oil price and the yield of Malaysian sovereign bond and sukuk from year 2006 until 2015. The findings show that the weakening of exchange rate and oil prices contribute different impacts in the short and long run. In the short run, the exchange rate and oil prices does not have a direct relation with the yield of sovereign bond and sukuk. However, in the long run, the result reveals that there is a significant relationship between exchange rate and oil prices on the yield of sovereign bond and sukuk. It is evident that only a unidirectional causality relation is present between exchange rate and oil price towards selected yield of Malaysian sovereign bond and sukuk. This study provides numerical and empirical insights on issues relating to capital market that supports public authorities and private institutions on their decision and policymaking process.

scholarly journals Exchange Rates and Monetary Fundamentals: What Do We Learn from Linear and Nonlinear Regressions?

2014 ◽  
Vol 2014 ◽  
pp. 1-14 ◽  
Author(s):  
Guangfeng Zhang
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Correction Model ◽  
Exchange Rate Dynamics ◽  
Long Run ◽  
Exchange Rate Movements ◽  
Short Run ◽  
Us Dollar ◽  
Linear And Nonlinear ◽  
Japanese Yen

This paper revisits the association between exchange rates and monetary fundamentals with the focus on both linear and nonlinear approaches. With the monthly data of Euro/US dollar and Japanese yen/US dollar, our linear analysis demonstrates the monetary model is a long-run description of exchange rate movements, and our nonlinear modelling suggests the error correction model describes the short-run adjustment of deviations of exchange rates, and monetary fundamentals are capable of explaining exchange rate dynamics under an unrestricted framework.

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