An Empirical Study on Short Term and Long-Term Consequences of Crude Oil on Economic Wellbeing of Indonesia by Applying Autoregressive Distributed Lag Model

Abstract

Oil has been one of the primary wellsprings of Indonesia's revenue, either from government spending plan or balance of payments purpose of perspectives. Because of supply and demand of oil on the planet market, prices of oil, either ICP, Brent UK, or WTI, had been decay of late. Oil prices and economic wellbeing are essential markers to see the achievement of Indonesia's improvement execution. The utilization of oil as the world's fundamental energy source when all is said in done and Indonesia specifically is driven by industrialization. The more ventures, the more prominent the energy resources required. In a similar setting, economic wellbeing will likewise expand oil demand. Oil has a strategic nature and is a vital ware that influences the world economy. Both oil exporters and merchants are probably going to feel the impacts of oil price advancements. Oil prices dropped pointedly since June 2014 finishing a 4 year time of relative price strength. The size and speed of decay has been noteworthy yet not remarkable. This exploration plans to analyze the impact of crude oil prices on economic wellbeing in Indonesia. Data on crude oil prices and economic growth are yearly time series data stretching from 1987 to 2016. The aftereffects of co-integration tests demonstrate that there is no long-term connection between crude oil prices and economic wellbeing. In any case, the estimation of the autoregressive distributed lag (5.0) model demonstrates that in the short term, there is the impact of crude oil prices toward economic wellbeing.

Fluctuations of Oil Prices and Gross Domestic Product in Indonesia

“…The country is also known as the net exporter of the oil and is mainly dependent over the oil as it is the main source of revenue of the country (Sha, 2017). From the year of 2005, the country has shifted its image from net exporter of oil to the importer of the oil and the contributions of oil to the income have been decreased which resulted in the production of the oil declining due to the depletion of the resources (Abdlaziz, Rahim, & Adamu, 2016); (Roespinoedji, Roespinoedji, Siam, & Shamsudin, 2019); (Adam, Saidi, Rahim, & Rosnawintang, 2019). It is investigated that Indonesia contained a large reserves of the crude oil in 2015 that contributes to the production of decline by 50% along with the revenue which can be decrease when the total percentage of GDP can be measured.…”

A Comparative Survey Data Analysis of Declining Oil Revenue Implications on the Economic Performance of Oil-Exporting Countries: Nigeria, Venezuela and Norway

“…For instance, Peng et al, (2020) used the Nonlinear ARDL in analysing the secondary data of the dynamic characteristics of oil price fluctuation from the crude oil price influence mechanism perspective. Similarly, Roespinoedji, et al, (2019); Nkoro and Uko (2016); Magoti and Mtui, (2020) employed the use of ARDL in analysing the secondary data inherent in their studies. Taghizadeh- Hesary and Yoshino (2015); Akpan and Atan, (2015) used the SVAR, while Farzanegan (2011) and Ali et al, (2015) used VAR in carrying out their analyses, with secondary data in the oil related studies.…”