ASYMMETRIC IMPACT OF WORLD OIL PRICES ON MARKETING MARGINS: APPLICATION OF NARDL MODEL FOR THE INDONESIAN COFFEE

Kamaruddin Kamaruddin,M Shabri Abd Majid,Sofyan Syahnur,Yusri Hazmi,Raja Masbar

doi:10.32479/ijeep.11857

Kamaruddin Kamaruddin, M Shabri Abd Majid + Show 3 more

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https://doi.org/10.32479/ijeep.11857

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Abstract

The World oil prices shocks is believed become the main important role to movements marketing margins of agricultural commodities, include coffee. We aim to investigate the impact of world oil prices shocks on coffee marketing margins for Indonesia. We decompose world oil prices into positive and negative shocks to investigate the asymmetric impacts on marketing margins. For this aims, we adopt a NARDL model to capture the asymmetric impacts both in long and short run. We found that a decrease in oil price has a positive and significant impact on marketing margins, while a decrease in oil price has a significant negative impact. An increase in world oil prices lead to reduce marketing margins. Similarly, a decrease in world oil prices, also impact on the reduction of marketing margins. We therefore conclude that impacts of world oil prices shocks on marketing margins not only asymmetric in magnitude but also in direction. Particularly, the result of the NARDL estimation reveal that negative shock in oil prices has more pronounced impact than positive shocks on the reduction of marketing margin. This result implies that Indonesian coffee producers more benefit when the world oil price decreases compare than increases.Keywords: Oil prices, marketing margin, coffee producers and NARDL modelJEL Classifications: C32, F13, F43, G13.DOI: https://doi.org/10.32479/ijeep.11857

Highlights

Price variations can be a positive signals for market players, and as well as negative signals if the price variations are too large and cannot be anticipated
The results show that the null hypothesis of symmetric impact of oil prices on marketing margins is rejected both in the long and short run (Table 6)
Unlike previous researchers (Ibrahim, 2015; Sarwar et al, 2020) who found only positive change in oil prices to impact on food prices, our results show that positive shocks in oil prices impact on marketing margins and negative shocks

Summary

Introduction

Price variations can be a positive signals for market players, and as well as negative signals if the price variations are too large and cannot be anticipated. Domestic and global economic cycles lead to volatility, include agricultural commodities prices. Domestic economic performances such as GDP per capita and exchange rates can influence commodity prices. Many empirical evidence linking changes in exchange rate and the GDP on the commodities prices. Claim a strong impact of GDP on commodity prices (Ibrahim, 2015; Bekkers et al, 2017). They found that the changes in exchange rates and GDP affected commodity trade, global and local food prices. Commodity price movements become more volatile after the 2008 global financial turmoil

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