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Do oil prices predict Indonesian macroeconomy?

journal contribution
posted on 01.11.2019, 00:00 authored by Susan SharmaSusan Sharma, D H B Phan, B Iyke
© 2019 Elsevier B.V. We examine, for the first time, whether oil price is a significant predictor of Indonesia's 31 macroeconomic variables. Our analysis employs monthly time-series data over the period 1986 to 2018, and a recently advanced flexible generalised least squares estimator that simultaneously addresses persistency, endogeneity, and heteroskedasticity in the data. We show that oil price significantly predicts eight macroeconomic variables. For the remaining 23 macroeconomic variables, we report either that oil price does not predict them or that their predictability is dependent on the choice of the forecasting horizon. Our results are robust to alternative measures of oil prices.

History

Journal

Economic Modelling

Volume

82

Pagination

2 - 12

Publisher

Elsevier

Location

Amsterdam, The Netherlands

ISSN

0264-9993

Language

eng

Publication classification

C1 Refereed article in a scholarly journal; C Journal article