Asymmetric effect of crude oil and palm oil prices on Indonesia's output

Abstract

This paper empirically examines the impact of the price of crude oil petrol and palm oil on Indonesia's output. Using quarterly data from 2000Q1 to 2019Q2 and both linear and non-linear autoregressive distributed lag approaches to cointegration, we find: 1) a significant non-linear effect of oil prices on the country's output; 2) a decline in prices of oil can have a greater impact on the country's output as compared to an increase in oil prices; and 3) the palm oil price changes have a bigger effect on the country's output compared to petroleum price.