Impact Of Monetary Policy On Price
After decades of relative stability, global commodity prices have increase a decade ago and has experienced a slight fluctuation since. That change obviously this has generated a lot of debate and opinions about the drivers commodity prices. Traditionally, the key driver of commodity prices has been the fundamental change in factors global demand and supply. Short term shocks, such as supply disruption sudden causes of worldwide supply shortages, and sometimes also affects commodity prices. These factors are still important today. However, ups and downs in commodity prices over the past few years as well as rapid development of instruments financials indexed to commodity prices have raised questions about the role played by financial market participants in commodity pricing. The plan researches both views and leverages the results of existing research to provide them a bit of an in-depth description of how far the commodity market is growing characterize financial markets, through the production of commodity-based financial products, has influenced recent commodity price trends.
Malaysia is a developing country and has an open economic system and Malaysia is a country of trade, the source of economic growth is measured by GDP can be divided into two categories, namely domestic demand and from demand between nations. Domestic demand is divided into consumption and investment, whether by the private sector or the public or government. Meanwhile, inter-country demand consists of net exports, namely export value after minus by the import value. Commodity products appear to be important in raising the country's economy either directly or indirectly. It can be a contributor to the country's gdp. This can be seen from the demand for agricultural goods whether locally or overseas such as crude palm oil. Crude palm oil is in high demand due to its wide range of users. Schuh 1974 said that monetary policy play a role on determining the commodity prices.
Monetary policy is the action of the central bank or national bank to influence the economy by controlling the supply of money and changing interest rates in the country. The motives of this study is to obtain the result of relationship between dependent and independent variables which relatively expansionary monetary policy that involved of interest rate and money supply and crude palm oil prices. The data used in this research is a comprising quarterly data for 1988 to 2017 in Malaysia. The data is obtained from world bank and IMF data sources. This research analyze the data of variables involved in this research by using method unit root test, granger causality test and cointergration test.
In looking at the current state of the economy both domestically and globally, commodity output should be given attention to increase the country's income and thus raise the country's economic level indirectly for a long term benefits. The focus of this study is to investigate the commodity prices using monetary policy within the focused region, which in this case is Malaysia. Previous study had selected various type of variables in order to conduct their study. However, corresponding with the study objectives and hypotheses in this study, each of the variables that was selected expansionary monetary policy has been carefully determined with the sense of finding its impact toward the commodity prices in the selected area.
In the next research, future researchers may used this research as a guide for a better results by applying more methodology, increase the numbers of data and sample for more precise results that can be used widely including others commodity products of other countries. To sum up, this chapter had explained the issues that had become a concern to the world not just to the selected area of study. The variables selection was conducted only to satisfy the motivations of this study, which is also focusing only within the selected region. Each of the selected variables was briefly defined in this chapter and the data collection sources. Collected data was then transferred into a suitable presentation method for further explanation. For the section, attention will be given more to the previous studies that has been conducted in the past. It is aiming to invest age the significances of this study and at the same time to identify the differences done in the previous studies. The next chapter will be written in the search for more literature reviews to ensure this study had follow the right path of reaching its purposes.
