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Export Demand of Palm Oil in Malaysia: Analysis Using ARDL Approach

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  • Ismail, Normaz Wana
  • Kamal, Sarah Nursyazmin Mohamad
  • Firdaus, Muhamad
  • Hariri, Norazwa Mohamed

Abstract

The growth of the palm oil industry in Malaysia has established a demand for exports among trading partners worldwide. As a result, Malaysia has gained a reputation as the world's largest producer and exporter of palm oil. Crude palm oil production in 1980 was 2.50 million tonnes; however, by 2019 it had increased to 19.86 million tonnes due to the high export demand for oil palm products. This study studies the export demand for palm oil in Malaysia from 1991 to 2019 by adopting autoregressive distributed lag (ARDL) for cointegration to analyze the export demand determinant, weighted average trading partner income, Malaysian export price, competitor export price, world export price of palm oil, world export price of soybean oil, and real effective exchange rate. The main findings reveal that the factors that determine Malaysian export demands for palm oil are palm oil price changes and trading partner income. In addition, the study also finds that European restrictions on unsustainable palm oil consumption hurt Malaysia’s export demand for palm oil.

Suggested Citation

  • Ismail, Normaz Wana & Kamal, Sarah Nursyazmin Mohamad & Firdaus, Muhamad & Hariri, Norazwa Mohamed, 2022. "Export Demand of Palm Oil in Malaysia: Analysis Using ARDL Approach," Asian Journal of Agriculture and Rural Development, Asian Economic and Social Society (AESS), vol. 12(03), January.
    • Handle: RePEc:ags:ajosrd:342372
    DOI: 10.22004/ag.econ.342372
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    References listed on IDEAS

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    1. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    2. Gan, Peck Yean & Li, Zhi Dong, 2014. "Econometric study on Malaysia׳s palm oil position in the world market to 2035," Renewable and Sustainable Energy Reviews, Elsevier, vol. 39(C), pages 740-747.
    3. Wilman, Elizabeth A., 2019. "Market Redirection Leakage in the Palm Oil Market," Ecological Economics, Elsevier, vol. 159(C), pages 226-234.
    4. Abdelhak S. Senhadji & Claudio E. Montenegro, 1999. "Time Series Analysis of Export Demand Equations: A Cross-Country Analysis," IMF Staff Papers, Palgrave Macmillan, vol. 46(3), pages 1-2.
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