IDEAS home Printed from https://ideas.repec.org/a/eco/journ2/2020-05-59.html
   My bibliography  Save this article

Do Oil Price Shocks Give Impact on Financial Performance of Manufacturing Sectors in Indonesia?

Author

Listed:
  • Sudarso Kaderi Wiryono

    (Institute Teknologi Bandung, Indonesia)

  • Oktofa Yudha Sudrajad

    (Institute Teknologi Bandung, Indonesia)

  • Eko Agus Prasetio

    (Institute Teknologi Bandung, Indonesia)

  • Marla Setiawati

    (Institute Teknologi Bandung, Indonesia)

Abstract

The panel vector autoregression model is estimated using three main variables related to with profitability, financial liquidity, and financial leverage for 94 manufacturing companies from 2000 to 2017 in Indonesia. The aim is to examine the impact of oil price shocks on the ROA (profitability), CR (financial liquidity), and DER (financial leverage). The impulse reaction function of samples reveals some remarkable results. First, the response of ROA, DER, and CR appears to be consistent in many ways. Second, either Brent oil or WTI oil gives the same result for these variables. Third, financial liquidity for Indonesia manufacturing companies is not affected by the oil prices. The results obtained are robust following the GMM model in the estimation of the panel VAR.

Suggested Citation

  • Sudarso Kaderi Wiryono & Oktofa Yudha Sudrajad & Eko Agus Prasetio & Marla Setiawati, 2020. "Do Oil Price Shocks Give Impact on Financial Performance of Manufacturing Sectors in Indonesia?," International Journal of Energy Economics and Policy, Econjournals, vol. 10(5), pages 510-514.
    • Handle: RePEc:eco:journ2:2020-05-59
    as

    Download full text from publisher

    File URL: https://www.econjournals.com/index.php/ijeep/article/download/9808/5313
    Download Restriction: no
    File URL: https://www.econjournals.com/index.php/ijeep/article/view/9808/5313
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Francesco Guidi, 2010. "The Economic Effects of Oil Prices Shocks on the UK Manufacturing and Services Sectors," The IUP Journal of Applied Economics, IUP Publications, vol. 0(4), pages 5-34, October.
    2. Nasir, Muhammad Ali & Naidoo, Lutchmee & Shahbaz, Muhammad & Amoo, Nii, 2018. "Implications of oil prices shocks for the major emerging economies: A comparative analysis of BRICS," Energy Economics, Elsevier, vol. 76(C), pages 76-88.
    3. Aye, Goodness C. & Dadam, Vincent & Gupta, Rangan & Mamba, Bonginkosi, 2014. "Oil price uncertainty and manufacturing production," Energy Economics, Elsevier, vol. 43(C), pages 41-47.
    4. Hilde Christiane Bjørnland, 1997. "Estimating Core Inflation - The Role of Oil Price Shocks and Imported Inflation," Discussion Papers 200, Statistics Norway, Research Department.
    5. John Elder & Apostolos Serletis, 2010. "Oil Price Uncertainty," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(6), pages 1137-1159, September.
    6. Konstantinos Drakos & Panagiotis Th. Konstantinou, 2013. "Investment decisions in manufacturing: assessing the effects of real oil prices and their uncertainty," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 28(1), pages 151-165, January.
    7. Don Bredin & John Elder & Stilianos Fountas, 2010. "The Effects of Uncertainty about Oil Prices in G-7," Working Papers 200840, Geary Institute, University College Dublin.
    8. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    9. Love, Inessa & Zicchino, Lea, 2006. "Financial development and dynamic investment behavior: Evidence from panel VAR," The Quarterly Review of Economics and Finance, Elsevier, vol. 46(2), pages 190-210, May.
    10. Elder, John & Serletis, Apostolos, 2011. "Volatility In Oil Prices And Manufacturing Activity: An Investigation Of Real Options," Macroeconomic Dynamics, Cambridge University Press, vol. 15(S3), pages 379-395, November.
    11. Ibrahim Halil Eksi & Mehmet Senturk & H. Semih Yildirim, 2012. "Sensitivity of Stock Market Indices to Oil Prices: Evidence from Manufacturing Sub-Sectors in Turkey," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 59(4), pages 463-474, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mohammad Aladwan & Omar Alsinglawi & Omar M. Alhawatmeh & Mohammad Almaharmeh, 2023. "Corporate Financial Performance and the Intervening Role of Energy Operating Costs: The Case of Jordanian Electricity Sector," International Journal of Energy Economics and Policy, Econjournals, vol. 13(5), pages 202-212, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Zhang, Xiaoyu & Zhou, Jinlan & Du, Xiaodong, 2022. "Impact of oil price uncertainty shocks on China’s macro-economy," Resources Policy, Elsevier, vol. 79(C).
    2. Maghyereh, Aktham & Abdoh, Hussein, 2020. "Asymmetric effects of oil price uncertainty on corporate investment," Energy Economics, Elsevier, vol. 86(C).
    3. Gupta, Rangan & Pierdzioch, Christian & Salisu, Afees A., 2022. "Oil-price uncertainty and the U.K. unemployment rate: A forecasting experiment with random forests using 150 years of data," Resources Policy, Elsevier, vol. 77(C).
    4. Mamothoana Difeto & Reneé van Eyden & Rangan Gupta & Mark E. Wohar, 2018. "Oil Price Volatility and Economic Growth: Evidence from Advanced OECD Countries using over One Century of Data," Working Papers 201813, University of Pretoria, Department of Economics.
    5. van Eyden, Reneé & Difeto, Mamothoana & Gupta, Rangan & Wohar, Mark E., 2019. "Oil price volatility and economic growth: Evidence from advanced economies using more than a century’s data," Applied Energy, Elsevier, vol. 233, pages 612-621.
    6. Zhang, Zhikai & Wang, Yudong & Xiao, Jihong & Zhang, Yaojie, 2023. "Not all geopolitical shocks are alike: Identifying price dynamics in the crude oil market under tensions," Resources Policy, Elsevier, vol. 80(C).
    7. Afees A. Salisu & Rangan Gupta & Abeeb Olaniran, 2023. "The effect of oil uncertainty shock on real GDP of 33 countries: a global VAR approach," Applied Economics Letters, Taylor & Francis Journals, vol. 30(3), pages 269-274, February.
    8. Hachula, Michael & Hoffmann, Sebastian, 2015. "The output effects of commodity price volatility: Evidence from exporting countries," Discussion Papers 2015/29, Free University Berlin, School of Business & Economics.
    9. David Bourghelle & Fredj Jawadi & Philippe Rozin, 2021. "Oil price volatility in the context of Covid-19," International Economics, CEPII research center, issue 167, pages 39-49.
    10. Yin, Libo & Yang, Sen, 2023. "Oil price returns and firm's fixed investment: A production pattern," Energy Economics, Elsevier, vol. 125(C).
    11. Elder, John, 2021. "Canadian industry level production and energy prices," Energy Economics, Elsevier, vol. 99(C).
    12. Gkillas, Konstantinos & Gupta, Rangan & Pierdzioch, Christian & Yoon, Seong-Min, 2021. "OPEC news and jumps in the oil market," Energy Economics, Elsevier, vol. 96(C).
    13. Elder, John & Payne, James E., 2023. "Racial and ethnic disparities in unemployment and oil price uncertainty," Energy Economics, Elsevier, vol. 119(C).
    14. Gürkan Bozma & Murat Akadg & Rahman Aydin, 2021. "Dynamic Relationships between Oil Price, Inflation and Economic Growth: A VARMA, GARCH-in-mean, asymmetric BEKK Model for Turkey," Economics Bulletin, AccessEcon, vol. 41(3), pages 1266-1281.
    15. Cheng, Dong & Shi, Xunpeng & Yu, Jian & Zhang, Dayong, 2019. "How does the Chinese economy react to uncertainty in international crude oil prices?," International Review of Economics & Finance, Elsevier, vol. 64(C), pages 147-164.
    16. Nguyen, Bao H. & Okimoto, Tatsuyoshi & Tran, Trung Duc, 2022. "Uncertainty-dependent and sign-dependent effects of oil market shocks," Journal of Commodity Markets, Elsevier, vol. 26(C).
    17. Tarek Bouazizi & Mongi Lassoued & Zouhaier Hadhek, 2021. "Oil Price Volatility Models during Coronavirus Crisis: Testing with Appropriate Models Using Further Univariate GARCH and Monte Carlo Simulation Models," International Journal of Energy Economics and Policy, Econjournals, vol. 11(1), pages 281-292.
    18. Jiang, Yong & Zhou, Zhongbao & Liu, Qing & Lin, Ling & Xiao, Helu, 2020. "How do oil price shocks affect the output volatility of the U.S. energy mining industry? The roles of structural oil price shocks," Energy Economics, Elsevier, vol. 87(C).
    19. Pham, Huy & Ha, Van & Le, Hanh-Hong & Ramiah, Vikash & Frino, Alex, 2024. "The effects of polluting behaviour, dirty energy and electricity consumption on firm performance: Evidence from the recent crises," Energy Economics, Elsevier, vol. 129(C).
    20. Śmiech, Sławomir & Papież, Monika & Rubaszek, Michał & Snarska, Małgorzata, 2021. "The role of oil price uncertainty shocks on oil-exporting countries," Energy Economics, Elsevier, vol. 93(C).

    More about this item

    Keywords

    Oil price shocks; Panel VAR; Impulse Reaction Function; GMM model;
    All these keywords.

    JEL classification:

    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eco:journ2:2020-05-59. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ilhan Ozturk (email available below). General contact details of provider: http://www.econjournals.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.