Factors influencing production of palm oil in Malaysia

The purpose of this paper is to study factors influencing the production of palm oil in Malaysia. This paper is using annual data from 1980 to 2017 which get from Department of Statistics Malaysia (DOSM). The objective of this study is to know if there is a significant relationship between the production of palm oil with Price of Palm oil, Price of Rubber, Land Area and Total Government Expenditure. This study tested the data by using root test, The Johansen Cointegration test and Vector Error Correction Model test to analysis the data to solve the objectives. We found that the model we used is cointegrated and the test indicated that there is long-run causality running from the Price of palm oil, Price of rubber. Land Area and Total Government Expenditure to cause the Total Production of Palm Oil and there is no short run causality running from all the independent variables toward the production of palm oil. Lastly, Price of Palm oil, Land Area and Government Expenditure has a positive impact on the production of palm oil while, Price of Rubber has a negative impact on the production of palm oil, on average, ceteris paribus. The coefficient statistically significant at 5%.