The impact of oil price shock on Malaysia Real GDP Growth
Sumbang Ak Melai, Universiti Malaysia Sabah,
Financial Economics
Nur Muhamad Bakti Bin Haji Ishak, Universiti Malaysia Sabah,
Financial Economics
Mohd Idris Bin Lawe, Universiti Malaysia Sabah,
Financial Economics
Abstract
This paper empirically investigates, in the contexts of ADF test, co integration and granger causality test, the dynamic relationship between these two measures of oil prices shock and real GDP growth in Malaysia. Using yearly data for the Malaysia real GDP from (1970) and world oil price from (2007)
Keywords: GDP, Oil Price, ADF Unit Root Test, Cointegration Test and Granger Causality.
1.0 INTRODUCTION
The aim of this paper is to investigate the impact of these variables on Malaysia GDP by using the most recent time series data and also reexamine the empirical link between oil price shocks and GDP, which has been well documented in the literature, to produce additional evidence. A growing body of literature has provided evidence on several features of empirical relationship between oil price shocks and GDP. These features have been emerged by a change in the pattern of oil price movements since the mid-1980s. There were lots of oil prices increases before the mid-1980s, and since then, there have been both increases and decreases in the price of oil. A brief review of related empirical investigations is provided as follows. Mork (1989) concluded that oil price increases had more impact on the economy than oil price decreases. Dotsey and Reid (1992) confirmed the Mork’s findings that oil price increases were more important than oil price decreases in affecting GDP.
1.1 &n ...