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<p>Indonesia’s position as a major biodiesel producer has made its palm oil market increasingly vulnerable to global energy and commodity price volatility. While biodiesel policies and crude oil benchmarks are key factors, their evolving and asymmetric relationships with crude palm oil (CPO) price volatility remain underexplored. This study investigates the dynamic interlinkages between CPO, vegetable oil markets, global crude oil prices and Indonesia’s biodiesel levy across distinct policy phases. Using the Dynamic Conditional Correlation (DCC) variant of the Multivariate GARCH model, specifically the POWER-GARCH specification, the analysis draws on daily return data from January 2006 to December 2023, incorporating real effective exchange rate (REER) movements and biodiesel levy regime shifts. Findings show persistent CPO price volatility with clear asymmetries: negative shocks trigger greater volatility than positive ones. Notably, Indonesia’s shift from a fixed to a progressive biodiesel levy coincided with an intensification of long-run correlation persistence between CPO and external oil markets. These dynamics are associated with increased price exposure for Malaysia as the regional CPO benchmark, particularly during oil price spikes and abrupt policy changes. Such evolving correlation patterns offer timely insights for regulatory adaptation, especially considering Indonesia’s progressive biodiesel levy and blending mandates (B20–B40). Moreover, these findings inform strategic risk management and dynamic hedging approaches, which are increasingly vital for navigating uncertainty in a policy-sensitive palm oil sector.</p>

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Dynamic interrelationship between Indonesia’s biodiesel policy and palm oil markets using a multivariate DCC-GARCH model

  • 期刊论文

  • 出版模式：

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  • 发表日期：

    2026年4月28日

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  • Nur Ain Mohd Hassan,
  • Norlin Khalid,
  • Tamat Sarmidi,
  • Azrina Abdullah Al-Hadi,
  • Kalsom Zakaria,
  • Nur Nadia Kamil

摘要

Indonesia’s position as a major biodiesel producer has made its palm oil market increasingly vulnerable to global energy and commodity price volatility. While biodiesel policies and crude oil benchmarks are key factors, their evolving and asymmetric relationships with crude palm oil (CPO) price volatility remain underexplored. This study investigates the dynamic interlinkages between CPO, vegetable oil markets, global crude oil prices and Indonesia’s biodiesel levy across distinct policy phases. Using the Dynamic Conditional Correlation (DCC) variant of the Multivariate GARCH model, specifically the POWER-GARCH specification, the analysis draws on daily return data from January 2006 to December 2023, incorporating real effective exchange rate (REER) movements and biodiesel levy regime shifts. Findings show persistent CPO price volatility with clear asymmetries: negative shocks trigger greater volatility than positive ones. Notably, Indonesia’s shift from a fixed to a progressive biodiesel levy coincided with an intensification of long-run correlation persistence between CPO and external oil markets. These dynamics are associated with increased price exposure for Malaysia as the regional CPO benchmark, particularly during oil price spikes and abrupt policy changes. Such evolving correlation patterns offer timely insights for regulatory adaptation, especially considering Indonesia’s progressive biodiesel levy and blending mandates (B20–B40). Moreover, these findings inform strategic risk management and dynamic hedging approaches, which are increasingly vital for navigating uncertainty in a policy-sensitive palm oil sector.