Asymmetric Impacts of Oil Price Shocks on Malaysian Economic Growth: Nonlinear Autoregressive Distributed Lag Approach

Authors

1 Faculty of Management and Social Sciences, Bauchi State University, Gadau, Nigeria.

2 School of Graduate Studies, Universiti Putra Malaysia, 43400 UPM, Serdang, Selangor, Malaysia; School of Business and Economics, Universiti Putra Malaysia, 43400 UPM, Serdang, Selangor, Malaysia.

Abstract

T





his empirical study intends to examine the behavior of oil prices on Malaysian economic growth whether nonlinearity implies. The dynamic models of Linear and Nonlinear Autoregressive Distribution Lags (ARDL and NARDL) are used to estimate the models. The study used annual data from 1975 to 2015. The study used the real Malaysian spot oil price (Miri) as oil price unlike. The results from the linear model revealed that oil prices positively increase economic growth both in the short-run and the long-run. To achieve our objective, the NARDL estimator was used to detect the impact of positive and negative changes in oil prices. The results reveal that there is nonlinear relation among the variables in the long-run relationship as the evidence of cointegration was found. Increases in oil price boost economic growth positively while a decrease in oil price is not as indicate insignificantly. The error correction term confirms the results to indicate negative, significant, and less than 1 percent.  That is the speed of adjustment after the oil price shock. The results have important policy implications, exposed that the impacts of oil price changes (positive and negative) are not necessarily equal.
 

Keywords

Iranian Economic Review
Volume 24, Issue 4
December 2020
Pages 959-981

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