Abstract
Crude palm oil (CPO) is one of the commodity that contributes aggressively to the Malaysian economy. Malaysia, at present, grasps the position as the world’s second-largest palm oil producer and exporter in the world after Indonesia. However, there is uncertainty in the price of CPO, and the trend shows an intense fluctuation for the last 20 years. The drive of this study is to examine the relationship and the impacts of four macroeconomic variables, namely the exchange rate (EXC), inflation (INF), money supply (M3) and gross domestic product (GDP) on the Malaysian CPO price. The focus is on the macroeconomic factors that affect CPO price in Malaysia from 1999 to 2018. The research uses secondary data collected from the World Bank and Datastream. The study employs descriptive statistics, Augmented Dickey-Fuller test (ADF) unit root, correlation and multiple regression tests to analyze the data. Based on the ADF test results, the data series are integrated or stationary. Pearson’s correlation test reveals that the EXC has negative correlation while INF, M3 and GDP indicate a positive correlation with the CPO price, respectively. The multiple regression test results are also consistent with the correlation test. INF and GDP found to be significant variables, whereas EXC and M3 are not. These findings are beneficial to the policymakers, palm oil growers or producers and palm oil-related products manufacturers in their planning, forecasting, and making the best policy-related, business and investment decisions in the future. Through this research, the researcher can conclude the findings and correlation between the macroeconomic factors with CPO price in Malaysia.
Highlights
Malaysia is the Southeast Asian country comprising of the Peninsular Malaysia and the Malaysian Borneo
Based on the expectation of understanding the determinants of Crude palm oil (CPO) price and the ultimate objective to help the government to increase the Gross National Income (GNI), this study looks at this matter from the perspective of the macroeconomic factors
The exchange rate measured by R.M. per USD, and the inflation rate is measured by the consumer price index (CPI) with the based 2010 = 100, and the money supply measured by broad money (M3)
Summary
Malaysia is the Southeast Asian country comprising of the Peninsular Malaysia and the Malaysian Borneo. The total land area of 330,803 km and a population of 32,049,700 based on the 2017 estimate. Malaysia experiences equatorial climate influenced by alternating Northeast and Southwest monsoons bringing rainfall and dry weather, respectively (Tang, 2018). Oil palms are highly productive and significantly contributed to the Malaysian economy. The development of oil palm plantations benefited rural areas and gave rise to the issues of welfare, human right, equity and demographic change by improving the community incomes (Tang and Al Qahtani, 2019). The biodiversity and environmental management, sustainability certification, increased social corporate responsibility and review of employment policy are among the perceived benefits for the oil palm industry
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