The effects of oil price shocks on inflation in Malaysia

Abstract

The objective of this study is to examine the effect of oil price shock on inflation in Malaysia using monthly data from 2005 until 2011. The data on exchange rate, consumer price index and oil price were collected. Granger Causality model was employed to analyze the data. This study found out that there was Granger Causality effect of oil price and inflation. The exchange rate also influenced the inflation but inflation was more largely affected by the oil price.