The effect of oil shock on the global economy is evident through many studies. However, the effect is heterogeneous over time. One of the reasons that lead to such different impacts is due to the oil source that is either the oil shock is demand or supply- driven. Applying the structural vector autoregressive (SVAR) model to generate the three oil shocks based on the three oil sources (oil supply, oil demand and oil specific- demand), we extended the examination on the effect of oil shock on the global economy using the threshold regression. Our results reveal the threshold effects of oil directly and indirectly on the global economy. The impacts of oil shocks differ across sectors, implying oil intensity, as well as oil sources, are the factors that determine the impact of oil shocks on the global economy. Overall, the oil specific-demand shock is more influential among the three oil shocks. Hence, the global economy is oil demand-driven. Besides that, the impact of oil is relatively large in the energy sector when compared to the non-energy sector and precious metals industry. Despite that, the impact of oil shocks is small if compared to the non-oil shocks such as exchange rate changes and global consumer price inflation shock. Consequently, non-oil shocks are the main determinants of the global economic fluctuation. The study leads to a better understanding of the transmission of oil shock and its sources, the interaction between oil and economic indicators and the policy implication due to oil dependency/ intensity.
Price stability is one of the main policy objectives that is targeted by policymakers in many countries. Price uncertainty occurs due to the changes in market structure and consumer preference and expectation, which may affect price stability. In this study, the researchers aimed to examine the effects of price uncertainty of consumer price disaggregation in Malaysian sectors. To be specific, the researchers were seeking to discover on how domestic and global commodity prices can affect sectoral Consumer Price Index (CPI) on price inflation in Malaysia and most importantly, whether the effect is different for economic sectors in Malaysia. In addition, the effects of other factors (i.e., internal and external factors) on Malaysian sectoral CPI inflation were also studied. The threshold generalized autoregressive conditional heteroscedasticity (TGARCH) model was used to generate the price uncertainties. For the purpose of analysis, the threshold regression approach was applied based on time series of each single sector, followed by a combination of panel data of all sectors. The results differed across sectors, revealing that the impact of price uncertainties was determined by the sensitivity of each sector towards the price uncertainties. The effect of price increase is larger than the effect of price decrease. Price fluctuations were obvious in sectors that were dependent on consumer price or commodity price. Exchange rate and oil price inflation had also greatly influenced the CPI inflation.