Price Linkage between International Price of Crude Palm Oil (CPO) and Cooking Oil Price in Indonesia

Cooking oil in Indonesia is considered to be one of the staple food of Indonesian people. In the beginning of 2008, the price of cooking oil in Indonesia has increased significantly. One of the reasons is the increase of Crude Palm Oil (CPO) price in the international market. The objective of this research is to investigate the impacts of international price of CPO on the domestic price of CPO and cooking oil. Three specific objectives are included (1) To test whether international price of CPO and domestic price of CPO and cooking oil are related through cointegration tests, (2) To test the causal relationships between international price of CPO and domestic price of CPO and cooking oil and (3) To analyze how domestic price of CPO and cooking oil food prices respond to a change in international price of CPOThe result indicates that international price of CPO, domestic price of CPO and cooking oil price are not cointegrated. In addition, using the Granger causality method, it shows that international price of CPO influence the domestic price of CPO and cooking oil price. Meanwhile, domestic price of CPO and cooking oil price affects each other.