Analysis of Some Energy and Economics Variables by Using VECMX Model in Indonesia

Authors

  • Mustofa Usman Universitas Lampung, INDONESIA
  • Luvita Loves Universitas Lampung
  • Edwin Russel Universitas Lampung
  • Muslim Ansori Universitas Lampung
  • Warsono Warsono Universitas Lampung
  • Widiarti Widiarti Universitas Lampung
  • Wamiliana Wamiliana Universitas Lampung

DOI:

https://doi.org/10.32479/ijeep.11897

Abstract

Time series modeling analysis is one of the methods to forecast based on past data and conditions. The analytical tool that is commonly used to forecast multivariate time series data is the Vector Autoregressive (VAR) model. However, when the variables have cointegration and stationary at the first difference value, then the VAR model is modified into the Vector Error Correction Model (VECM). In VECM, all variables can be used as endogenous variables. If exogenous variables are involved in the VECM model, then the model is called as Vector Error Correction Model with Exogenous variables (VECMX). In the present study, a time series modeling analysis was used to analyze the price of gasoline, the money supply in a broad sense (M2), oil and gas exports, and consumption imports over the years from 2012 to 2020. By using information on the criteria of Akaike Information Criterion Corrected, Hannan–Quinn Criterion, Akaike Information Criterion, and Schwarz Bayesian Criterion, the best VAR(p) model is obtained with order 3, or lag 3. Based on the VAR(3) model, the cointegration test is conducted, and the result shows that there is a long-term relationship among variables, namely, there is a cointegration relationship between variables with rank = 1. Based on the cointegration rank = 1 and the smallest value of the information criteria and comparison of some candidate best models, namely, VECMX(2,1), VECMX(2,2), VECMX(3,1), VECMX(3,2), and VECMX(4,1), we found that the best model is VECMX(3,1) with lag 3 for endogenous variables and lag 1 for exogenous variables. Based on this best model, further analysis of Granger causality, Impulse Response Function (IRF), and forecasting is discussed.

Keywords:

VAR model, VECMX, time series, Granger causality, Impulse response function

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Author Biographies

Mustofa Usman, Universitas Lampung, INDONESIA

Department of Mathematics,  Assoc. Prof.

Luvita Loves, Universitas Lampung

Department of Mathematic, Graduate Student

Edwin Russel, Universitas Lampung

Department of Management,  Lecturer

Muslim Ansori, Universitas Lampung

Department of Mathematic, Senior Lecturer

Warsono Warsono, Universitas Lampung

Department of Mathematic, Senior Lecturer

Widiarti Widiarti, Universitas Lampung

Department of Mathematic, Lecturer

Wamiliana Wamiliana, Universitas Lampung

Department of Mathematic, Professor

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Published

2022-03-20

How to Cite

Usman, M., Loves, L., Russel, E., Ansori, M., Warsono, W., Widiarti, W., & Wamiliana, W. (2022). Analysis of Some Energy and Economics Variables by Using VECMX Model in Indonesia. International Journal of Energy Economics and Policy, 12(2), 91–102. https://doi.org/10.32479/ijeep.11897

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