A Model of the Dynamics of the Effect of World Crude Oil Price and World Rice Price on Indonesia’s Inflation Rate

Abstract

This study aims to investigate the dynamics of the effects of world crude oil prices and world rice prices on Indonesia's inflation rate in the period between January 2004 and September 2015. Monthly time series data spanning from January 2004 to September 2015 are analyzed using difference equation model as the econometric tool. Test result shows that there existed a dynamic effect of world oil crude prices and world rice prices on inflation rate in Indonesia. The World crude oil prices positively affected the inflation rate in that each 1% increase (decrease) in the world crude oil prices caused the inflation rate to go up (drop) by 0.33%. The world rice prices also positively affected the inflation rate, where each 1% increase (decrease) in world rice prices was followed by a 0.52% rise (fall) of the inflation rate.

The Impact of Oil Prices on the G7’s Inflation Rate: An Econometric Study for the Period (1986-2016)

“…According to Valadkhani and Mitchell (2002) there is a direct impact of high oil prices on Australia's consumer price index. This finding agreed with the results of a number of studies conducted on other economies, such as: (Khair al-Din, 2008) study on the Jordanian economy, (Bin Sabia', 2010) study on the Algerian economy, (Ahmad & Rahim, 2013) study on the Pakistani economy, (Misati, 2013) on the Kenyan economy as well as the (Adam, 2016) study on the Indonesian economy, Theresearchers pointed out in the last study that the rise in oil prices by (1%) will lead to an increase in inflation rates by (0.33%).…”

Forecasting Models Based on Data Analytics for Predicting Rice Price Volatility: A Case Study of the Sri Lankan Rice Market

“…In conclusion, the researchers observed a new¯nding that both European crude oil price and world rice price have a signi¯cantly positive in°uence on Indonesia's in°ation rate. Thus, the study provided adequate evidence for a relationship between a country's in°ation rate and the price of rice on the world market (Adam et al, 2016). Another study carried out on the relationship between oil and global food prices examined the relationship between world crude oil price and the price of three grains: wheat, corn, and soy beans.…”

“…Further, hypothesis testing, Copula function of dependence, Marginal Distribution model, Correlation matrix, Global Cropland Allocation model and Di®erence equation model are also used in few studies to evaluate the relationship between considered variables, i.e. (Bakhshodeh, 2012;Reboredo and Ugando, 2014; Chen et al, 2014;Adam et al, 2016).…”

The Impacts of Covid-19: An Econometric Analysis of Crude Oil Prices and Rice Prices in the World

“…Another study examined the impacts of world prices of rice and crude oil on inflation rate in Indonesia (Adam et al, 2016). Econometric methods of analysis were used.…”

“…It is utilized by way of transportation (Adam, 2016;Rafiq et al, 2009). Therefore, there is direct association among crude oil price and agriculture products prices, together with rice (Baumeister and Kilian, 2014;Adam et al, 2016;Sugden 2009).…”