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Determinants of Global Palm Oil Demand: A Gravity Approach

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  • Rini Yayuk Priyati

    (The University of Western Australia and Universitas Terbuka, Indonesia)

Abstract

This paper reviews the determinants of global palm oil trade using the gravity model. This model helps to explain how the shift in demand for palm oil has affected trade flows among trading partners. We decompose the effects of growth in the regional markets, location, and the reduction in the palm oil price relative to other edible oils, on palm oil exports. We find that standard variables suggested by the gravity literature, such as the growth of GDP, GDP per capita, and location, are indeed important determinants of palm oil trade. Given the preceding results, we simulate whether the economic growth of Indonesia?s trading partners can explain the growth in palm oil export demand from Indonesia. The simulation results for top ten Indonesia?s trading partners suggest that the growth of palm oil imports is a great deal higher than the growth of income for all countries.

Suggested Citation

  • Rini Yayuk Priyati, 2018. "Determinants of Global Palm Oil Demand: A Gravity Approach," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 10(2), pages 148-164, Oktober.
    • Handle: RePEc:uii:journl:v:10:y:2018:i:2:p:148-164
    DOI: 10.20885/ejem.vol10.iss2.art4
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    References listed on IDEAS

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    3. Yu, Tun-Hsiang (Edward) & Bessler, David A. & Fuller, Stephen W., 2006. "Cointegration and Causality Analysis of World Vegetable Oil and Crude Oil Prices," 2006 Annual meeting, July 23-26, Long Beach, CA 21439, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    4. Peri, Massimo & Baldi, Lucia, 2010. "Vegetable oil market and biofuel policy: An asymmetric cointegration approach," Energy Economics, Elsevier, vol. 32(3), pages 687-693, May.
    5. Rini Yayuk Priyati & Rod Tyers, 2016. "Price Relationships in Vegetable Oil and Energy Markets," Economics Discussion / Working Papers 16-11, The University of Western Australia, Department of Economics.
    6. D. J. Sanders & J. V. Balagtas & G. Gruere, 2014. "Revisiting the palm oil boom in South-East Asia: fuel versus food demand drivers," Applied Economics, Taylor & Francis Journals, vol. 46(2), pages 127-138, January.
    7. Peter Egger & Michael Pfaffermayr, 2003. "The proper panel econometric specification of the gravity equation: A three-way model with bilateral interaction effects," Empirical Economics, Springer, vol. 28(3), pages 571-580, July.
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    Cited by:

    1. Nur Ain Mohd Hassan & Kalsom Zakaria & Kamalrudin Mohamed Salleh & Siti Mashani Ahmad, 2023. "An empirical analysis of Malaysian palm oil export to world major palm oil importing countries:," Operations Research and Decisions, Wroclaw University of Science and Technology, Faculty of Management, vol. 33(1), pages 61-73.
    2. Adhikari, Shweta & Poudel, Dikshit & Gopinath, Munisamy, 2023. "Is Policy Greasing the Wheels of Global Palm Oil Trade?," Research on World Agricultural Economy, Nan Yang Academy of Sciences Pte Ltd (NASS), vol. 4(2), June.
    3. repec:ags:aaea22:335475 is not listed on IDEAS

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    More about this item

    Keywords

    Palm oil; trade; gravity model;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade

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