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The impact of macroeconomic variables on commodity futures prices: an evidence from Malaysian crude palm oil futures

Ahmed, Khalil and Zain, Mohamed and Mohd Noor, Azman and Alsaadi, Abdul Rahman and Milhem, Marwan and Ahmad, Alhasan (2020) The impact of macroeconomic variables on commodity futures prices: an evidence from Malaysian crude palm oil futures. European Journal of Molecular & Clinical Medicine, 7 (6). pp. 2095-2105. ISSN 2515-8260

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Abstract

The current study aims to fulfil the gap of knowledge in commodity futures by empirically examining the influence of selected macroeconomic variables on the prices of commodity futures particularly Crude Palm Oil Futures (FCPO). Cointegration, Vector Error Correction and Granger causality analyses are used to examine the nexus between macroeconomic variables (interest rate, exchange rate and Industrial Production Index (IPI)) and FCPO from January 1999 to December 2019. Results show that interest rate, exchange rate and IPI have a significant influence on FCPO prices in the long-run. While interest rate and exchange have a negative impact, IPI has a positive impact. VECM results suggest that the macroeconomic variables appear to have no significant shortrun causal effect associate with the FCPO prices. Granger causality test indicate that FCPO and exchange Granger cause IPI and act as leading indicators for IPI. The study implicates that policy makers should carefully design policy (monetary and fiscal intervention) to reduce swings in the commodity futures prices to protect hedgers and investors

Item Type: Article (Journal)
Uncontrolled Keywords: Interest rate, Cointegration, Industrial Production Index, Granger Causality, Exchange rate and Vector Error Correction Model
Subjects: H Social Sciences > HB Economic Theory
Kulliyyahs/Centres/Divisions/Institutes (Can select more than one option. Press CONTROL button): Institute of Islamic Banking & Finance (IIiBF)
Depositing User: Mrs Suhani Saarani
Date Deposited: 10 Feb 2021 12:32
Last Modified: 10 Feb 2021 12:32
URI: http://irep.iium.edu.my/id/eprint/88315

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