Oil Price, Government Revenue, Export Value, and Economic Growth: Indonesia’s Case

Authors

  • Yoopi Abimanyu

DOI:

https://doi.org/10.31685/kek.v20i3.194

Abstract

Oil has been one of the main sources of Indonesia’s revenue, either from government budget or balance of payments point of views. Due to supply and demand of oil in the world market, prices of oil, either ICP, Brent UK, or WTI, had been decline lately. There are three hypotheses in this paper. The first hypothesis, oil prices change has a positive relationship with the government revenue. Using correlation coefficient, it is found that prices of oil are positively correlated with government revenue in terms of income tax and non-tax revenue with relatively small value. The second hypothesis, oil prices have a positive correlation with export value. Correlation coefficient indicates that they are positively correlated with a somewhat higher value relative to the first finding. The third hypothesis is oil prices are positively correlated with economic growth in terms of GDP constant price. Using Johansen cointegration, it is found that oil prices are not cointegrated with economic growth. This implies that oil is correlated with government revenue and export value. However, it seems that for the whole economic growth, oil is not correlated to the economy, or the reduction of oil price would not necessarily translate into a decline in the economic output.

References

Barsky, RB.. & Kilian, L. (2001). Do we really know that oil caused the great stagflation ? A

monetary alternative, NBER Working Papers 8389.

Barsky R. & Kilian, L. (2004), Oil and the macroeconomy since the 1970s. Journal of Economic

Perspectives, 18 (4), 115-134. Bernanke,, B., Gertler, M., & Watson, M. (1997). Systematic

monetary policy and the effects of oil price shocks. Brookings Papers on Economic Activity 1,

-157.

Boheman, H. & Maxen, J. (2015).Oil price shocks effect on economic growth: OPEC versus non-

OPEC economics. Lund University.

Bruno, M. & Sachs, J. (1982). Energy and resource allocation: a dynamic model of the “Dutch

Diseaseâ€. NBER Working Paper Series.

Corden, W.M. (1984). Booming sector and Dutch Disease economics: survey and consolidation.

Oxford Economic Papers, 36(3), 359-80.

Du, L., He.Y., & Wei, C. (2010). The relationship between oil price shock and China’s

macroeconomy: An empirical analysis. Energy Policy, 38(8), 4142-4151.

Ebrahimzadeh, C. (2012). Dutch Disease: wealth managed unwisely. IMF.

Ehrhart, H., & Guerineau, S. (2009). The Impact of high and volatile commodity prices on public finances:

Evidence from developing countries. Banque de France. Paris.

Enders, W. (2015). Applied Econometric Time Series. 4th ed. New York: John Wiley & Sons, Inc.

Foo, N. (2015). Falling crude oil prices: the impact on the economy of the Asia-Pacific region.

International Association for Energy Economics.

Frankel, J.A., Vegh, C.A., & Vuletin, G. (2013). On graduation from fiscal procyclicality. Journal of

Development Economics, 100 (1), 32-47.

Ftiti, Z., Guesmi, K.,, Teulon, F., & Chouachi, S. (2016). Relationship between crude oil prices

and economic growth in selected OPEC countries. The Journal of Applied Business Research, 32 (1).

Gangelhoff, G. (2015). The end of the commodity super-cycle? implications for USAID presence

countries. USAID Economics Brief. Washington DC.

Greene, W. H. (2011). Econometric Analysis. 7th ed. Prentice Hall.

Hamilton, D. (1983). Oil and macroeconomic since world war II. Journal of Political Economy, 91(2),

-248.

Husain, A.M., Arezki, R., Breuer, P., Haksar, V.,, Helbling, T., Medas, P., & Sommer, M. (2015).

Global implications of lower oil prices. IMF Staff Discussion Note.

Ismail, K. (2010). The structural manifestation of the “Dutch Disease’: the case of oil exporting

countries. IMF Working Paper.

Jimenez-Rodriguez, R., & Sanchez, M. (2004). Oil price shock and real GDP growth: empirical

evidence for some OECD countries. European Central Bank Working Paper Series No, 362.

Medina, L. (2010). The dynamic effect of commodity prices on fiscal performance in Latin

America. IMF Working Paper. IMF.

Naccache, T. (2010). Slow oil shocks and the weakening of the oil price-macroeconomy

relationship. Energy Policy. 38(5), 2340-2245.

OPEC, ,see Organization of the Petroleum Exporting Countries.

Organization of the Petroleum Exporting Countries. (2016). Annual Statistical Bulletin. Vienna.

Rahma, E, Perera, N., & Tan, K. (2016). Impact of oil price shocks on Sudan’s government budget.

International Journal of Energy Economics and Policy. 6(1), 243-248.

Rogoff K. (2005), Oil and the global economy. International Energy Forum meeting, Riyadh,

November 19

Tang. W. W. (2010). Oil price shocks and their short and long term effects on Chinese economy.

Energy Economics, 32, S3-S14.

Downloads

Published

2016-12-01

Issue

Vol. 20 No. 3 (2016)

Section

Articles

License

STATEMENT OF AUTHENTICITY AND COPYRIGHT RELEASE

I hereby certify that:

  1. The article (Article title) is authentic and never being published previously or will be published in other publication as well as not a plagiarism in any form.
  1. The article does not have any issue with other parties, regarding of the publication copyright.
  1. All the authors have read this statement and agree with the name and sequence.
  1. Hereby, I transfer the copyright of my article (Article title) to the KEK Editorial Board . this copyright transfer includes a right to reproduce a photograph for the similar article and its translation. This is also including a right to upload the article into a computer system which disseminated widely on the internet.
  1. Hereby, I agree with my article (Article title) to be published by KEK Volume (xx) Edition (x), under Creative Common Attribution- NonCommercial-ShareAlike 4.0 licensing. This is also including a right to upload the article into a computer system which disseminated widely on the internet.

Name : (Full Name)
Date : (Signing date)