The Malaysian Consumer Price Index Economics Essay

The Malayan Consumer exp wind upiture Index Economics EssayThe consumer hurt tycoon (cost-of-living index) is measurement of the percentage change through snip in the m geniustary value of purchasing a constant group of goods and alike services and it likewise nameing an ordinary pattern or indication from the purchases made by the citizen in one specific period of time. The Index is started since 1967 = 100 (which is the establish year) was the index for the Peninsular Malaysia while the Index for the year 1980 is referring to Malaysia which subject matter that the whole Malaysia. e rattling last(predicate) the series of info of the cost-of-living index be establish on internationally accepted statistical procedure. Each of this series is follow the recomm stoped classification contained in the United Nations System of National Account (SNA), 1968 that must be followed by every untaught in measuring cost-of-living index. The most commonly methods or formula that been use to analyze and collect the data of cost-of-living index is Laspeyres, which is based on the item that be locally consumed reflecting the spending habits of average citizen. The items and so been include in the Consumer toll Index is usually a fatality product or the product or services that been continuously employ by the consumer. In prior 2006 the goods and services were classified according to categorization of Household Goods and Services (CHGS) with the nine main(prenominal) group which is Food, Beverage and Tobacco, dress and Footwear, Gross Rent Fuel Power, Furniture and Furnishing Household Equipment and Operation, Transportation and Communication, cheer Entertainment Education and Cultural Services, and lastly is Miscellaneous goods and services. These baskets of consumer product lose been changes from CHGS to COICOP (Classification of Individual Consumption According to mapping) in year 2006 until now and the additive group of product has been change to t welve which is Alcohol and Non-Alcohol Food and alcoholism and R turn outine Household Maintenance, others are remained constant.1.1 BACKGROUND OF STUDYThis national conducted to visualize what is the causal relationship amid stintingal shifting and Malaysian CPI. The main purpose of this enquiry is to reveal the relationship of stinting versatiles touch on towards the CPI for the last five years. The consumer expense Index or CPI is the oecumenic and major index that excuseed the changes in retail outlay paid by the rest home for goods and services. CPI measures the changes in the general level of hurts of a obstinate basket of goods and services which represents the items which are normally consumed by an average household in Malaysia with reference to the base period. The CPI is designed to provide a broad measure of changes in retail prices experienced by Malaysian households as a group and should not be expected to on the barelyton reflect the experience of a ny individual household. Therefore it leave alone assert changes depending on the legion(predicate) factors that will work on it. The economic varying that been interrogation in this try out is pretentiousness count, step in rate, thread oil color color, capital submit and in addition Consumer outlay Index. This look for wants to reveal what is the protean that will gather in the relationship with Consumer price Index. Although the existing investigate provides some support think between the economic variable and CPI there is need for spare investigate.1.2 PROBLEM commandConsumer monetary value index is one of the major indicator in one country because of its explained the average general price of consumer product in that country. This is important because of its related with the efficiency of the country in managing the price of the consumer product that will remain changes from time to time. Therefore it is very important to understand what exactly the fa ctors that crown to the change on the CPI and the methods to control the changes. It is not good if a country declare a higher consumer price index contrast to the average household income, it means that the household stimulate a constraint in spending their specie towards necessity product. Thus, in this research the main point is to know which economic variables that will give an impact towards the consumer product and the efficiency of the variable influence the CPI.1.3 RESEARCH QUESTIONIn this domain, there are several research questions that has been developed regarding the problem statement occurred. The research question of this research is1.3.1 To learn out the current condition of the Consumer Price Index1.3.2 To find out the reason the fluctuation of Consumer Price Index1.3.3 To identified the effect of the economic variable towards the consumer price Index1.3.4 To find out the consequences of the impact towards the country and household.1.3.5 To list the ways to ov ercome a large fluctuation of the Consumer Price Index.1.4 OBJECTIVE OF STUDYSeveral studies on CPI found that it is a common view that every country has a fluctuation on the Consumer Price Index. However, it natesnot be denied that some of the economic variable will impact the fluctuation of CPI and it are been prove by the past research that been found in the abroad study. Therefore the main purpose of this study is to know the impact of the economic variable that been utilize as a variables towards the Consumer Price Index.1.5 SIGNIFICANT OF THE STUDYThere are several others factors that lead to the fluctuation or changes on the consumer Price Index such as political decision making, political stability, and a government decision evolution plan. In this study we just only want to research on the economic variable that would give a huge impact towards the CPI, compare to the others economic variables and the crucial of the impact.1.6 SCOPE OF STUDYThe scope of this study would assure the consumer price product in Malaysia and the significant changes of the consumer product price. Next, this study also cover some of the economic variable that been choose as free variables.The time horizon used in this study is single grouchy sectional where the economic variables may come from consumer price index (CPI), fill rate, foreign exchange, Money supplement and palm oil.1.7 LIMITATION OF STUDY quantify constraint has been encountered ever since the study has been started at the early semester 2011 until April 2011 therefore its clog in order to distri simplye questionnaire and have a respondent and break down a feedback on CPI. The study has been do by using the data that been collected and also the recent past supporting journal that have been done.This study is based on the data collected from the secondary sources and also the primary resources. The data been collected from the beginning January of the year 2005 until declination end 2010. The time pe riod of this research is for the 5 years.1.8 DEFINITION OF TERMS1.8.1 CPICPI volumes represent the Consumer Price Index which is the average general price of consumer product that been group in Malaysia.1.8.2 inflation rateThe rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling1.8.3 Exchange paceThe price of one countrys currency expressed in some other countrys currency. In other words, the rate at which one currency can be exchanged for another1.8.4 Money SupplyThe entire total of bills, coins, loans, credit and other liquid instruments in a countrys economy.1.8.5 Palm oilPalm oil is the current price of the Palm rock oil in countries.1.9 SUMMARYConsumer price index is one of the major indicator that been chitchat in evaluate the condition of one country. There are a few other indicator that can been use to evaluate one country such as the criminal cases, population, economic and others variable but the mo st preferable indicators is CPI because its related with the consumer which is the customer and price which is resources and leads to the revenue. So it is important to control CPI simultaneously with the household income because of its have a negative correlational statisticss. This study will taste the impact of economic variable towards the CPI. Few economic variables are taken to tryout whether there are any significant correlation between the restricted and unconditional variables.CHAPTER 3METHODOLOGY AND selective information3.0 INTRODUCTIONThe object lenss of this study are to find the correlation between the economic variables and impact towards the consumer price index. Specifically, this study is meetd which variable is have a huge impact towards the movement of the CPI. Therefore by doing this research we can exactly get the true information on the movement of the consumer price index rather than cod surmisal based on the own ideology. To achieve the objective o f study, several test have been use to get the result of the variable. Example of the test that wants to be done is T-Test, F Test and Multiple Regressions. The test has been choosing because of it will give a clear and transparent view on the result and its uncomplicated compared to others test that more complicated. This test also have been supported by the surmise based on the understanding on the issued that been research or discuss. The dead reckoning is the early assumption on the result that will happens at the end of the study.3.1 DATA COLLECTIONData concerning on the historical of CPI and the economic variables were gathered to see whether there are any correlation between the dependent and all those independent variables.The secondary data will be collected from the past recent journal regarding this study. The study or research have been develop by the foreign people or country, but the variable is not the same but still similar. The journal that been used is only for support the consumer price index situation.3.2 SAMPLING FRAMETo take prisoner an acceptable result, this study decided to use 5 economic variables from others economic variables and the data is collected for 5 years and in monthly instauration.3.3 SOURCES OF DATAThe data on the dependent variables CPI was collected from the Malaysian part of Statistic and the data are updated until December 2010 which is on the current updated. The data is in Malaysian Ringgit (RM). Next for the independent variables the data are been collected from the DataStream which is for Inflation come out in percentage (%), Exchange rate in Malaysian ringgit (RM), Money Supply in Malaysian Ringgit (RM), and lastly for the palm oil is still in the Malaysian Ringgit (RM). The data have been collected from January 2005 until December 2010 and by using monthly data basis.3.4 VARIABLES AND MEASUREMENTThe variables used in this study can be categorized into two main types which are the dependent and the indepen dent variables.3.4.1 Dependent VariablesThe dependent variable for this study is the Consumer Price Index which will be measured in terms of average general level of price that been group under COICOP.3.4.2 Independent VariablesFor this study, there are four independent variables that will be measured. There is the inflation rate, exchange rate, Money Supply and Palm vegetable oil3.5 RESEARCH chassisThis research is designed to explore the relationship between dependent and independent variables. In this study, it engages in hypotheses testing that will explain the certain significant correlations between economic variables and the decision of going public.3.5.1 Purpose of the StudyThe purpose of this study is to determine the causal relationships between economic variable and CPI or want to know the impact of the economic variable towards the CPI.3.5.2 Types of probeThis study involved the correlation types of investigation which is want s to investigation the relationship betwe en the variables whether have a vigorous relationship, semi strong relationship, weak relationship and lastly is no relationship with the variables.3.5.3 Unit of abridgmentIn this study, Consumer Price Index, Exchange Rate, Inflation rate, Money Supply, Palm Oil Price.3.5.4 Time HorizonThis study will use monthly basis data from year January 2005 until December 2010THEORETICAL FRAMEWORKThere is a classical theory that explained the high correlation between the economic variable factors influence the fluctuation of the Consumer Price IndexDependent variable Consumer Price indexIndependent variables Inflation rate, exchange rate, Money Supply and Palm Oil Price.Figure 1 Schematic Diagram (Relationship Diagram)Inflation RateIndependent DependentConsumer Price IndexExchange RateMoney SupplyPalm oil PriceAccording to the schematic plat above, it can be elaborated that the Consumer Price Index are determine by the inflation rate, Exchange Rate, Money Supply and Palm Oil Price.3.6 DATA A NALYSIS AND TREATMENTThe statistical tools use in the study is Multiple bilinear Regression Model. This model of analysis is done to examine the simultaneous effects of several independent variables on a dependent variable that is interval scaled. In other used since is can explain the correlation between the dependent and independent variable. By using this correlation we can identify which variable will affect most on the dependent variable. This equation is one of the method that easier to use and understand.Multiple Linear Regression Model(Equation 1)WhereY = Dependent variable which represent Consumer Price Index= The constant number of equation= Independent variable which represent Inflation Rate= Independent variable which represent Exchange Rate= Independent variable which represent Money Supply= Independent variable which represent Palm Oil Price= Error3.7 HYPOTHESIS STATEMENTConsumer Price Index movement can be influenced by many factors. The changes in these CPI may sign ificantly change the spending of consumer and household. The consumer price index may also be effect by others out-of-door factors that cant be measures by using the data as an example political, government plan , and criminal cases that are happens and increase from time to time. Thus, there is important to make the hypothesis before makes a research and construct a finding. This hypothesis is bringing a general assumption the impact of the economic variables towards the consumer price index. venture 1H0 inflation rate is a main subscriber of the increasing in oil price. speculation 2H0 exchange rate is not a main contributor to the changes in general level of price.Hypothesis 3H0 Money supply also a contributor to the movement of the Consumer Price Index level.Hypothesis 4H0 Palm Oil is not a main contributor to the changes in average level of consumer price Index.3.8 SUMMARYIn the nutshell, this chapter will provide the research design that will be used in this study. The stud y aims to determine the relationship between economic variable factors and the consumer price index. This research will be done in accordance to the objective where to know whether there is any significant relationship between the economic variable factors with the average general price of CPI. This information will perchance can be used by the household, private and public sector, for them to make a plan in the current general consumer price Index. Since study focuses on the data from 2005 until 2010, if would give a better picture on the movement of the historical CPI until current price influence by positive relation economic factors.