The Impact Analysis of the Variation in the Price of Oil and the Exchange Rate on the Optimal Quantity of Orders in the Zinc Importing Companies in Colombia

Abstract

This paper analyses the impact of oil price and exchange rate variations on the economic order quantity (EOQ) of the zinc importing industry in Colombia. As a methodology, a vector autoregressive model (VAR) is applied, which allows quantifying how the variation of one variable impacts another in a dynamic system of equations. The results show a negative impact on EOQ by exchange rate revaluation due to increased import costs. On the other hand, oil price increments generate growth in the EOQ because the peso appreciates, purchasing imported raw materials inexpensive.

Keywords

• Economic order quantity, EOQ, oil, inventory policy, exchange rate, VAR