STUDYING OF THE IMPACT OF OIL PRICE FLUCTUATIONS ON INFLATION RATE AND ECONOMIC GROWTH OF THAILAND USING THE SIMULTANEOUS EQUATION MODEL

Abstract

The purposes of the research were 1) To analyze the impact of oil price fluctuations on inflation rate of Thailand 2) To analyze the impact of oil price fluctuations on economic growth of Thailand 3) To analyze the role of monetary policy and interest rates on inflation and investment. And 4) To use the two-stage least squares regression analysis tool to handle endogeneity problems. Conduct research using the Econometric Analysis method to study the relationship and impact of interest rates on oil price fluctuations on inflation rate and economic growth of Thailand. Using Cointegration analysis with Simultaneous equations model (SEM) and Two-stage least squares regression model (2SLS) analysis. Data used in the analysis include oil price fluctuations, inflation rates, economic growth, investment, Money supply, and interest rate from 2002 to 2022.

The result of the study were as follows: 1) The fluctuations of oil prices over the past two years and the money supply of the previous year have a positive relationship with inflation, but economic growth has a negative relationship with inflation rate of Thailand 2) The fluctuations in oil prices and investment over the past year have a positive relationship with economic growth, and the changes in inflation over the past year have a negative relationship with economic growth 3) The change in interest rate is not statistically significant, so this variable is removed and re-estimated. It is found that the change in economic growth in the previous year is related to investment, while inflation is positively related to investment. And 4) The relationship between the variables is appropriately related to each other. Instrumental variables are used, money supply, foreign exchange rate, net export value, investment, money supply to solve the problem of endogeneity.