Abstract
<p>Economic fluctuations can be caused by demand shocks and supply shocks. One of the supply shocks is caused by changes in world crude oil prices. As a net importer of crude oil, any change in crude oil prices makes domestic economic activity vulnerable to these shocks. The purpose of this study is to determine the effect of fluctuations in world crude oil prices on economic variables in Indonesia in the form of economic growth, inflation, and exchange rates. In addition, this study also analyzes the causal relationship between these variables. The type of data used is secondary data sourced from the BP Statistical Review of World Energy and the Worldbank. This research uses the VAR/VECM method, the research period was carried out during the years 1967-2019. The results showed that during 1967-2019 fluctuations in world crude oil prices had a significant positive effect on economic growth and had a significant negative effect on inflation and the exchange rate in the long run. Meanwhile, in the short term, world crude oil price fluctuations do not significantly affect economic growth, inflation, and the exchange rate. The results of the Granger causality show that there is no two-way causality relationship between variables.</p><p><strong>Keywords:</strong> Fluctuation World Crude Oil Price, Economic Growth, Inflation, Exchange Rate, VAR/VECM, Granger Causality Test</p>
Highlights
The economy experiences fluctuations in economic activity as measured by real economic growth, both in the short and long term
Economic fluctuations are caused by changes in aggregate demand or aggregate supply
Shocks are shocks that can change the cost of producing goods and services so that they have a direct impact on price changes, for example, an increase in world oil prices by OPEC (Organization of Petroleum Exporting Countries)
Summary
The economy experiences fluctuations in economic activity as measured by real economic growth, both in the short and long term. Economic fluctuations are caused by changes in aggregate demand or aggregate supply These changes are referred to as supply and demand shocks. This commodity is used as the main input in producing energy sources. Before it can be utilized, crude oil must go through an oil refinery to be processed into products that can be used directly, such as gasoline, diesel, kerosene, LPG and so on. It is these uses that make crude oil prices a hot topic at the international level. This is because not all countries have sufficient crude oil resources to meet their country's energy needs, while the crude oil AFEBI Economic and Finance Review (AEFR)
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