The Effect of Crude Oil Prices and Internet on Economic Growth in Timor Leste

Pasrun Adam,Asrul Jabani,Wali Aya Rumbia,Dzulfikri Azis Muthalib,Abd Azis Muthalib,Yuwanda Purnamasari Pasrun

doi:10.32479/ijeep.11992

Abstract

Continuous economic growth improves the welfare and the living standards of the people. However, for a country to experience economic growth, several factors come into play, including resource endowment, economic policies, political stability, and more. This research aimed to examine the effect of crude oil prices and internet on economic growth in Timor Leste. An autoregressive distributed lag model was used to analyze the time series data from 2005-2020. The cointegration test results showed that crude oil prices, internet, and economic growth are cointegrated. Based on the model coefficients, the estimation results revealed crude oil prices and internet have a significant effect on the country's long-term and short-term economic growth. The long-term effect of crude oil prices on economic growth is negative. In every 1% increase of crude oil prices, there is a 10.3% decrease in economic growth. A 1% reduction in crude oil prices leads to a 10.3% economic growth. Furthermore, the long-term effect of the internet has a long-term positive effect on economic growth. Every 1% internet increase, there is a corresponding 27.65% increase in economic growth.

Highlights

Economic growth depends on human and physical capital, technology, and labor force
Abbritti et al (2020) examined the effect of crude oil prices on economic growth in the United States, and the results indicated that rising crude oil prices increase economic growth
Rosnawintang et al (2021), using the autoregressive distributed lag (ARDL) panel model and data from 1995 to 2018, examined ASEAN countries (Indonesia, Taiwan, Singapore, the Philippines, and Malaysia), and the results showed that the internet affects economic growth in the long and short term

Summary

Introduction

The increase in the working population, the tools needed for efficient work, and other variables, such as labor, raw materials, and capital improves the economy (Tumoro, 2021). The need to improve the welfare of people makes the efforts to increase the economic growth of Timor Leste urgent. This depends on many factors, including crude oil prices (Awunyo-Vitor et al, 2018). A small change in the prices of crude oil affects all sectors in the economy. An increase in the price of crude oil raises the cost of manufactured goods, transportation, service provision, and all other economic sectors. The effects resulting from changes in crude prices have attracted researchers seeking to unravel the relationship between crude oil prices and economic growth both from a theoretical and empirical perspective (Awunyo-Vitor et al, 2018)

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Conclusion