The relationship between oil price shocks and China's macro-economy: An empirical analysis

Limin Du, He Yanan and Chu Wei

Energy Policy, 2010, vol. 38, issue 8, 4142-4151

Abstract: This paper investigates the relationship between the world oil price and China's macro-economy based on a monthly time series from 1995:1 to 2008:12, using the method of multivariate vector autoregression (VAR). The results show that the world oil price affects the economic growth and inflation of China significantly, and the impact is non-linear. On the other hand, China's economic activity fails to affect the world oil price, which means that the world oil price is still exogenous with respect to China's macro-economy in time series sense, and China has not yet had an oil pricing power in the world oil markets. The structural stability tests demonstrate that there is a structural break in the VAR model because of the reforms of China's oil pricing mechanism, thus it is more appropriate to break the whole sample into different sub-samples for the estimation of the model.

Keywords: Oil; price; shocks; Macro-economy; China (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (161)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:38:y:2010:i:8:p:4142-4151

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