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The Effect of Global Prices of Crude Palm Oil, Marketing Margins and Palm Oil Plantations on the Environmental Destruction: An Application of Johansen Cointegration Approach

Author

Listed:
  • Syahril Syahril

    (Faculty of Economics and Business, Universitas Syiah Kuala, 23111 Darussalam, Banda Aceh, Indonesia,)

  • Raja Masbar

    (Faculty of Economics and Business, Universitas Syiah Kuala, 23111 Darussalam, Banda Aceh, Indonesia,)

  • Sofyan Syahnur

    (Faculty of Economics and Business, Universitas Syiah Kuala, 23111 Darussalam, Banda Aceh, Indonesia,)

  • Shabri A. Majid

    (Faculty of Economics and Business, Universitas Syiah Kuala, 23111 Darussalam, Banda Aceh, Indonesia,)

  • T. Zulham

    (Faculty of Economics and Business, Universitas Syiah Kuala, 23111 Darussalam, Banda Aceh, Indonesia,)

  • Jumadil Saputra

    (School of Social and Economic Development, Universiti Malaysia Terengganu, 21030 Kuala Nerus, Terengganu, Malaysia)

  • Saiful Badli

    (Faculty of Economics, Universitas Teuku Umar, Meulaboh, 23681 Aceh Barat, Indonesia,)

  • Irmayani Irmayani

    (Faculty of Engineering, Universitas Teuku Umar, Meulaboh, 23681 Aceh Barat, Indonesia)

Abstract

As the most important factor in the world, palm oil is a crucial element that contributed to economic growth of a country. Besides as a role of the important vegetables oil, palm oil also gives a negative effect on environment through expanding the palm oil plantation. Therefore, this study aims to investigate the effect of global crude palm oil (CPO) price, marketing margins, and palm oil plantations on environmental destruction in the short-term and long-term. For examining the short-term and long-term effect, this study used Johansen Cointegration approach involving the bivariate causality with the Pirwise Granger Causality test and multivariate causality relationships with the Wald test. Also, we analyzed the responds of independent variables to dependent variable using impulse response (IRF) and variance decomposition (VD). This study used a monthly secondary data starting on 2008 to 2017 i.e. Environmental Quality Index, Global CPO price, Marketing margins and palm oil plantations. The data collected from 5 sources i.e. Central Bureau of Statistic (BPS), Food and Agriculture Organization (FAO), World Trade Organization, Central Bank of Indonesia (BI) and the Central Bank of Malaysia (BNM). The results of analysis shows that there is long-term relationship of global CPO price, marketing margins, and palm oil plantations on environmental quality index. For short run, this study found that global CPO price has a significant positive effect on environmental quality index. Meanwhile, the size of palm oil plantation and marketing margins have a significant negative effect on environmental quality index in Indonesia. Also, using the bivariate test, this study proves that there is one way causality relationship between the global CPO prices, marketing margins and size of oil palm area on environmental quality index. In addition, the global CPO prices and marketing margins fluctuations causing shock in environmental quality index.

Suggested Citation

  • Syahril Syahril & Raja Masbar & Sofyan Syahnur & Shabri A. Majid & T. Zulham & Jumadil Saputra & Saiful Badli & Irmayani Irmayani, 2019. "The Effect of Global Prices of Crude Palm Oil, Marketing Margins and Palm Oil Plantations on the Environmental Destruction: An Application of Johansen Cointegration Approach," International Journal of Energy Economics and Policy, Econjournals, vol. 9(4), pages 305-312.
    • Handle: RePEc:eco:journ2:2019-04-38
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    References listed on IDEAS

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    1. Bakri Abdul Karim & M. Shabri Abd. Majid, 2010. "Does trade matter for stock market integration?," Studies in Economics and Finance, Emerald Group Publishing Limited, vol. 27(1), pages 47-66, March.
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    Cited by:

    1. Syahril Syahril & Arie Saputra & Irmayani Irmayani & Mirdha Fahlevi & Yenni Ertika & Said Mahdani, 2022. "World Vegetable Soil Competition in 1960-2019," International Journal of Energy Economics and Policy, Econjournals, vol. 12(3), pages 108-115, May.
    2. da Costa Lima Pires, Pâmela & da Silva César, Aldara & Cardoso, Alexandre Nunes & Favaro, Simone Palma & Conejero, Marco Antonio, 2023. "Strategies to improve the competitiveness of an agroindustrial system for a macauba based oil production in Minas Gerais State, Brazil," Land Use Policy, Elsevier, vol. 126(C).
    3. Farah Roslan & Ștefan Cristian Gherghina & Jumadil Saputra & Mário Nuno Mata & Farah Diana Mohmad Zali & José Moleiro Martins, 2022. "A Panel Data Approach towards the Effectiveness of Energy Policies in Fostering the Implementation of Solar Photovoltaic Technology: Empirical Evidence for Asia-Pacific," Energies, MDPI, vol. 15(10), pages 1-22, May.

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    More about this item

    Keywords

    Global Crude Palm Oil Prices; Marketing Margin; Palm Oil Plantations; Environmental Quality Index;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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