OIL PRICE IMPACTS AND SECTORAL VULNERABILITY: EVIDENCE FROM A MIDDLE-INCOME COUNTRY

Abstract

The study investigates the differential exposure of Malaysia’s key economic sectors such as agriculture, mining and quarrying, manufacturing, and construction to oil price shocks. Employing a Structural Vector Autoregression (SVAR) model with short-run zero restrictions, the analysis disentangles the dynamic transmission mechanisms linking global oil price fluctuations to sectoral output in a resource-dependent, middle-income economy. The findings reveal that positive oil price shocks have a statistically significant and generally beneficial impact across all sectors, with mining and quarrying showing the highest sensitivity due to its direct link to global energy markets. Manufacturing, construction, and agriculture follow in descending order of responsiveness, reflecting differing degrees of international exposure and domestic value chain integration. By modelling these asymmetric sectoral responses over a long historical period, the study contributes novel empirical insights into the macroeconomic implications of resource dependence and offers valuable guidance for policymakers in managing external commodity-driven volatility.