The Factors that Lead to Instability of Commodity Price

The Factors that Lead to Instability of trade good Price1.1 accent of the get windCommodity set provide process the economy in some countries in the military personnel. There argon many divisor that nooky cause the imbalance of good charge. As we know good nookie be classified as goods that consumeed by the people. In the economic theory, if the demand higher than the supply it burn down cause shortage, if this is happen the economy in the country impart be instable. In the case of commodities, there are some(prenominal) technique to secure the impairment of good in read to make sure the bell is stable. For example, change in exchanged valuate, world political situation, inflation, orbicular output, industrial production and etc.1.2 Problem instructionOver many years, there are many police detectives make an compendium somewhat the factor that top out to imbalance of commodity expense. Most of them teach a different idea through out their research abo ut the instability of commodity price. This is important to a country to know what is rattling the cause of this factor. Therefore, a research must be deal out in lay out to know what is actually the factor that intimation to instability of commodity price.1.3 Research objectivesThe research objectives of this research as followsTo determine the factor that lead to instability of commodity price.To know the relationship between the factors toward the commodity price.To send the effect of commodity price.1.4 Scope and limitation of orbitIn order to hump the research of the study, I consecrate gathered trusted education from the internet. Few journals have been chosen to get some additional information. after that, in order to get what the objectives want of this study, secondary info have been chosen. The limitation of this study is to choose the best method that contribute conduct this research and it is hard to choose. There are methods depose be utilize to know the f actor that lead to instability of commodity price.1.5 Signifi put upce of the businessBy doing analysis on this study, we provoke reduce the risk of change magnitude commodity price due to the economic crisis.besides, we can determine the signoificant variables that effecting the commodity price. This research withal can give advantages to government because they can keep back the commodity prce base on the economic condition.2.0 Literature ReviewCommodity can be defined as goods whereby it is demanded by the people. As we can mark off today, the price of commodity is now increasing. In my opinion, it may be due the cost of resources that is too increasing. Therefore, we can say that the price of commodity is determined wholly by the market function. Commodity goods are consists of sugar, raw(a) oil, gold, rice and etc. When the value of commodity attachs, the cost will increase as well.There are some reasons that lead to the instability of the price of commodity. Thus, I h ave found out few reasons from knowledgable person that lead to the instability of the priceof commodity. A study of Frankel Rose (2009), have shown that the price of commodity is square off by inflation and global output. It was found that the relationship between the commodity and both the inflation and global output is positive. In addition, the microeconomic variables also concern the commodity price. For example, inventories. Another evidence also shown that the inflation also influence the commodity price (Gospodinov Ng, 2010). After the unemployment go and oil price being controlled, it was found that the price of 23 commodities were influenced by the inflation. Another study of Bower, Geis Winkler (2007), also shown that the inflation and exchange rate also influence the price of commodity. On the other hand, the study of Pindyck Rotemberg (1990), the macroeconomic violate influence the instability of price commodity, whereby, the industrial production and inflation will determine the future demand for commodity and will later affect the price of commodity. Thus, when the interest rate increase, the commodity price will decrease.However, the study of Bastourre, Carrera Ibarlucia (2007) have shown a different view on what affect the commodity price. This is because, in the long run the Argentina commodity price is influence by the real interest rate, real exchange rate of coupled States of America and the demand of raw materials. Other different view regarding instability of commodity price is influence by predictions of conditional variance and conditional expectations theories (Laroque, 1997). The global monetary conditions could also influenced the price of commodity whereby, in another(prenominal) study of Anzuin,Lombardi pagano(2010), it was found that the monetary policy shock gave impact to the instability of commodity price.In a different study of Wescott Hoffman (1999), it was found that the price of commodity as in corn and wheat w ere influenced by the inelegant policies, stockholding and government pricing support. When the agricultural policy maker asked the manufacturing business to increase the price, then the commodity price need to be increase or vice versa.According to Lalonde, Zhu Demers (2003), it has shown that the world economic activity and the rough-and-ready exchange rate of US dollar lead to influence the price of commodity. Thus, if the economic activity is active, it may lead to increase in commodity price. On the other hand, according to Tadesse Guttormsen (2010) the periodic price threshold influence the instability of commodity price. When the price of threshold increase, the commodity price will increase as well.After viewing the resources, I found several factors that lead to the instability of commodity price. Those factors consist of inflation, exchange rate, interest rate, global output and more. After identifying all the factors, the theoretical framework can be fielded. Thus, t he method to be use can be indentified and hypotheses can be made after analyzing all the data.2.1 Theoretical frameworkInflation flip Rate The factor that lead to instability of commodity price enkindle rateGlobal outputTheoretical framework is the part of the study including in research methodology. Usually the ne iirk of association can be more clear explained the entire variable in the study. If we look to the sketch above, there were in symbiotic variable on the left side and dependent variable on the right side. What is Independent and dependent variables? Independent is the variables that add unitedly itself, and dependent vice versa. From the sketch of theoretical framework above, we can see that the independent variable consist of four, inflation, exchange rate, interest rate and global output. The dependent variable is the factor that lead to instability of commodity price.3.0 information METHODOLOGY3.1 IntroductionBy using the secondary data the factor that lead to in stability of commodity price can be conducted. secondary data can be define as the data that already exist by the previous researcher. The data is consist of published and unpublished material such(prenominal) as journal, article and etc. Through the data base, the secondary data can be gained. Thus, the methods for this analysis are used to complete the objectives of the analysis.3.2 Data, universe and sampling methodIn order to complete the research, the data can be accumulate from world bank and Bursa Malaysia. the population is data is collected for Malaysian only. It is because this research is on commodity price in Malaysia.In my opinion population is the group of people that lives together in certain area. The researcher can gain their information or data in that area in order to complete his research. For example, if the researcher want to investigate about academic dishonesty or plagiarisation among the students in UiTM Sabah, he must collect the data from the population in UiTM Sabah only. On the other hand, this research is doing in Malaysia so that the data collected must be suitable because the data based on commodity price in Malaysia.Sampling method is divided into two which is chance sampling and non probability sampling. By using this sampling method, researcher can cut a lot of time doing research and also can cut cost.3.3 Analysis of dataTo estimate the data, the univariate modeling technique such as nave trend model, exponential smoofhing and lagragian model will be use.3.4 Hypothesis developmentThe hypothesis that can be concluded for this research is whether the dependent variable such as inflation, exchange rate, interest rate and global output will effect the instability of commodity price. The directive and the non directional hypothesis is the classification of hypothesis. The null and alternate hypothesis can either be rejected or accepted in ossification with the result from the test of the variables.3.5 SummaryBefore conducti ng a research, we have two element that have to be taken into consideration that is the data and methodology. It is soften to make sure the availability of data before one yield to do research. To gain an accurate result for a research we must use proper methods. When data is already gathered and analyzed, hypothesis can then be tested.