| Resumo: | This paper studies the impact of oil price shocks on Indonesian GDP and CPI inflation,
distinguishing between the period during which Indonesia was a net oil-exporting
country and when Indonesia became a net oil-importing country. This paper also
analyzes the asymmetric responses to oil price changes. Using impulse response
function on VAR model, this paper find that in the first period the shock in real oil price
positively affects GDP and it negatively affects CPI inflation, and in the second period,
the shock in real oil price positively affects GDP as well as it positively affects CPI
inflation. By using asymmetric response approaches, this paper find that the Indonesian
economy is more vulnerable to the decreasing real oil price than that to increasing real
oil price. It is evident that asymmetric responses exist between the impact of oil price
increase and that of oil price decrease. These findings suggest that because oil price has
significant impact on Indonesian real economic activities, the Indonesian government
should manage the production and consumption of oil, speed up efforts to shift from
reliance on oil as a source of energy to that on gas, develop alternative energy resources,
and encourage a change of industrial structure from resource-based industries to high
value-added ones.
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