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Impact of crude oil prices on the Malaysian palm oil market

Applanaidu, Shri Dewi and Abdel Hameed, Amna Awad (2013) Impact of crude oil prices on the Malaysian palm oil market. In: 2nd Applied International Business Conference (AIBC2013), 7 – 8 December 2013, Labuan School of International Business and Finance, Universiti Malaysia Sabah.

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The prices of crude oil and vegetable oil appear to be moving in tandem, a trend which was not observed before.This study seeks to examine the impact of world crude prices on the Malaysian palm oil market.To that end, structural econometric model consisting of eight structural equations and four identities was proposed in this study.The model has been estimated by two-stage least squares method using annual data for the period 1976 – 2011.The counterfactual analysis of a sustained 10 per cent increase in crude oil prices predicted a direct effect of a 0.10 per cent increase in palm oil world price.The indirect effects through the palm oil world price transmission channels were: 5.62 per cent decrease in export of palm oil, 4.03 per cent decrease in palm oil import, 0.07 per cent decrease in Malaysian palm oil price, 0.01 per cent increase in domestic consumption and 0.05 per cent decrease in palm oil supply.The increase in petroleum price does bring positive economic impact on selected sub-sectors of the palm oil industry such as it encourages domestic demand and boost the bio diesel industry.

Item Type: Conference or Workshop Item (Paper)
Additional Information: ISBN: 978-967-0521-26-8 Organized by: Universiti Malaysia Sabah.
Uncontrolled Keywords: petroleum price, Malaysian palm oil industry, simultaneous equations, two-stage least squares
Subjects: H Social Sciences > HB Economic Theory
Divisions: School of Economics, Finance & Banking
Depositing User: PM Dr. Shri Dewi a/p Applanaidu
Date Deposited: 18 Apr 2016 01:22
Last Modified: 18 Apr 2016 01:22
URI: http://repo.uum.edu.my/id/eprint/17954

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