Determinant of Volatility Natural Rubber Price

Abstract

This paper will investigate the determinant that make natural rubber price volatile, first of all, Malaysia is the third largest producer of natural rubber after Thailand and Indonesia. In this research paper the researcher will determine factor that will affect volatility natural rubber (latex) price in Malaysia. With the objectives of describing the high volatility in natural rubber price may be a result of international trade (export and import), inflation and crude oil petroleum. The data used for this study is from 1998-2012 every monthly that obtained from statistic rubber Malaysia and data stream. Therefore, a multiple regression been used as to test the hypothesis and identify the relationship between variables, another test that researcher do for this research are stationary test, hetero test, correlation test, multicolinerity test and Ramsey test. Whereby, the dependent variables for this study are Volatility natural rubber price in Malaysia, while the independent variables are crude oil petroleum price, inflation, export and import. Based on previous research studies, import variables have negative relationship with the rubber price in Malaysia to indicate this result researcher will make research whether from the previous study the researcher will get same result or vice versa. Otherwise for the result shows that crude oil petroleum, have positive relationship with volatility natural rubber price in Malaysia. The major implication of the finding is dependence on one commodity as a source of export earning is subject to risk, in another words the diversification of export crop promotion must be continued.