ENERGY TRADE AND INFLATION DYNAMICS IN ASEAN: THE MODERATING ROLE OF EXCHANGE RATES
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Universiti Malaysia Sarawak (UNIMAS)
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The primary objective of this study is to examine the impact of energy trade on inflation in ASEAN countries, with a specific focus on the moderating role of exchange rates. With the region’s growing reliance on energy imports and the rising volatility of global oil prices, understanding this dynamic is crucial for maintaining macroeconomic stability. Using 25 years of balanced panel data from 1997 to 2021, this study examines both the direct and indirect effects of energy trade flows, including imports and exports while on inflation rates, as measured by the Consumer Price Index (CPI). It also investigates whether fluctuations in nominal and real exchange rates amplify or mitigate the inflationary pressure arising from energy trade. Key variables include energy trade (ET), energy rate (EX), geopolitical (GEO), economic policy uncertainty (EPU), and control variables such as money supply (M2) and interest rate (IR). Data is sourced from reliable institutions including the World Bank, IMF, UN Comtrade, and national statistical offices. The study’s findings reveal significant interaction effects, highlighting that the inflationary impact of energy trade is more pronounced in countries with volatile exchange rates. These results carry key policy implications, suggesting that exchange rate stability and diversified energy strategies are essential in mitigating imported inflation pressures. Ultimately, this research contributes to a good understanding of macroeconomic vulnerabilities in emerging economies and offers strategic insights for central banks and policymakers across ASEAN. It underscores the necessity of coordinated energy and monetary policies in navigating external shocks and sustaining economic resilience.