Evaluating the mechanism of oil price shocks and fiscal policy responses in the Malaysian economy

Research output: Contribution to journalConference article

Abstract

The paper aims to explore the symmetric impact of oil price shock on economy, to understand its mechanism channel and how fiscal policy response towards it. The Generalized Impulse Response Function and Variance Decomposition under the VAR methodology were employed. The empirical findings suggest that symmetric oil price shock has a positive and direct impact on oil revenue and government expenditure. However, the real GDP is vulnerable in a short-term but not in the long term period. These results would confirm that fiscal policy is the main mechanism channel that mitigates the adverse effects oil price shocks to the economy.

Original languageEnglish
Article number012010
JournalIOP Conference Series: Earth and Environmental Science
Volume16
Issue number1
DOIs
Publication statusPublished - 01 Jan 2013
Event26th IAHR Symposium on Hydraulic Machinery and Systems - Beijing, China
Duration: 19 Aug 201223 Aug 2012

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fiscal policy
oil
public spending
Gross Domestic Product
decomposition
methodology
price
economy

All Science Journal Classification (ASJC) codes

  • Environmental Science(all)
  • Earth and Planetary Sciences(all)

Cite this

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title = "Evaluating the mechanism of oil price shocks and fiscal policy responses in the Malaysian economy",
abstract = "The paper aims to explore the symmetric impact of oil price shock on economy, to understand its mechanism channel and how fiscal policy response towards it. The Generalized Impulse Response Function and Variance Decomposition under the VAR methodology were employed. The empirical findings suggest that symmetric oil price shock has a positive and direct impact on oil revenue and government expenditure. However, the real GDP is vulnerable in a short-term but not in the long term period. These results would confirm that fiscal policy is the main mechanism channel that mitigates the adverse effects oil price shocks to the economy.",
author = "{A. Bekhet}, Hussain and {Mohamed Yusop}, {Nora Yusma}",
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AB - The paper aims to explore the symmetric impact of oil price shock on economy, to understand its mechanism channel and how fiscal policy response towards it. The Generalized Impulse Response Function and Variance Decomposition under the VAR methodology were employed. The empirical findings suggest that symmetric oil price shock has a positive and direct impact on oil revenue and government expenditure. However, the real GDP is vulnerable in a short-term but not in the long term period. These results would confirm that fiscal policy is the main mechanism channel that mitigates the adverse effects oil price shocks to the economy.

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