Inflationary Effect of Oil-Price Shocks in an Imperfect Market: A Partial Transmission Input-output Analysis

Libo Wu (), Jing Li and ZhongXiang Zhang

No 102507, Sustainable Development Papers from Fondazione Eni Enrico Mattei (FEEM)

Abstract: This paper aims to examine the impacts of oil-price shocks on China’s price levels. To that end, we develop a partial transmission input-output model that captures the uniqueness of the Chinese market. We hypothesize and simulate price control, market factors and technology substitution - the three main factors that restrict the functioning of a price pass-through mechanism during oil-price shocks. Using the models of both China and the U.S., we separate the impact of price control from those of other factors leading to China’s price stickiness under oil-price shocks. The results show a sharp contrast between China and the U.S., with price control in China significantly preventing oil-price shocks from spreading into its domestic inflation, especially in the short term. However, in order to strengthen the economy’s resilience to oil-price shocks, the paper suggests a gradual relaxing of price control in China.

Keywords: Resource/Energy; Economics; and; Policy (search for similar items in EconPapers)
Pages: 44
Date: 2011-03
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Citations: View citations in EconPapers (3)

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https://ageconsearch.umn.edu/record/102507/files/NDL2011-029.pdf (application/pdf)

Related works:
Journal Article: Inflationary effect of oil-price shocks in an imperfect market: A partial transmission input–output analysis (2013)
Working Paper: Inflationary effect of oil-price shocks in an imperfect market: a partial transmission input-output analysis (2011)
Working Paper: Inflationary Effect of Oil-Price Shocks in an Imperfect Market: A Partial Transmission Input-output Analysis (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:feemdp:102507

DOI: 10.22004/ag.econ.102507

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