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. Keywords: Oil price, Disaggregate consumer prices, NARDL, Indonesia,JEL Classifications: C22; E31DOI: https://doi.org/10.32479/ijeep.8287
Highlights
The prices of world crude oil have been steadily rising since 2000
The Phillips curve is extended to consider world crude oil price in empirical studies such as Cunado and de Gracia (2005); Chen (2009); Chou and Lin (2013); Ibrahim (2015) among the others. This present study investigates the effect of oil price on Indonesian disaggregate consumer price using the augmented Phillips curve
The CPI representing the aggregate consumer price level in Indonesia is calculated from the survey of consumer price for 88 cities across the countries
Summary
The prices of world crude oil have been steadily rising since 2000. It reached its highest level of US$ 100.01 per barrel in 2008. The inflationary effect of a hike in the world crude oil price on consumer price draws pay attention of researchers to investigate the inflationary impact of oil price in emerging markets such as Indonesia (Cunado and de Gracia, 2005; Cunado et al, 2015; and Abdlaziz et al 2016). This present paper investigates the asymmetric effect of oil price to Indonesian disaggregate consumer prices.
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