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Asymmetric Oil Price Pass-Through to Disaggregate Consumer Prices in Emerging Market: Evidence from Indonesia

Author

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  • Agus Widarjono

    (Department of Economics, Universitas Islam Indonesia, Yogyakarta, Indonesia.)

  • Abdul Hakim

    (Department of Economics, Universitas Islam Indonesia, Yogyakarta, Indonesia.)

Abstract

This study investigates the inflationary asymmetric effects of oil prices at disaggregate consumer prices for Indonesia using Non-linear Autoregressive Distributed Lag model (NARDL). The bound tests for cointegration affirm the existence of a long-run relationship between oil prices and the aggregate consumer price (CPI) and its all sub-components. With the exception of the education price index, our results suggest the asymmetric effect of oil price on all sub-components of CPI. The degree of oil price pass-through is an incomplete degree but varied among sub-components of CPI and is attributed to energy-related goods and services. The highest degree of oil price pass-through is foodstuffs price index, followed by the transportation price index. We also find the positive degree of oil price pass-through to disaggregate consumer price is higher than the negative degree of oil price oil pass-through to disaggregate consumer price.

Suggested Citation

  • Agus Widarjono & Abdul Hakim, 2019. "Asymmetric Oil Price Pass-Through to Disaggregate Consumer Prices in Emerging Market: Evidence from Indonesia," International Journal of Energy Economics and Policy, Econjournals, vol. 9(6), pages 310-317.
    • Handle: RePEc:eco:journ2:2019-06-36
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    References listed on IDEAS

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    1. Rizgar Abdlkarim Abdlaziz & Khalid Abdul Rahim & Peter Adamu, 2016. "Oil and Food Prices Co-integration Nexus for Indonesia: A Non-linear Autoregressive Distributed Lag Analysis," International Journal of Energy Economics and Policy, Econjournals, vol. 6(1), pages 82-87.
    2. Álvarez, Luis J. & Hurtado, Samuel & Sánchez, Isabel & Thomas, Carlos, 2011. "The impact of oil price changes on Spanish and euro area consumer price inflation," Economic Modelling, Elsevier, vol. 28(1), pages 422-431.
    3. Alghalith, Moawia, 2010. "The interaction between food prices and oil prices," Energy Economics, Elsevier, vol. 32(6), pages 1520-1522, November.
    4. Avalos, Fernando, 2014. "Do oil prices drive food prices? The tale of a structural break," Journal of International Money and Finance, Elsevier, vol. 42(C), pages 253-271.
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    Cited by:

    1. Agus Widarjono & Indah Susantun & Sarastri M. Ruchba & Ari Rudatin, 2020. "Oil and Food Prices for a Net Oil Importing-country: How Are Related in Indonesia?," International Journal of Energy Economics and Policy, Econjournals, vol. 10(5), pages 255-263.

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    More about this item

    Keywords

    Oil price; Disaggregate consumer prices; NARDL; Indonesia;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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