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Revisiting Oil Prices, Producer Price Index (PPI), and the Purchasing Managers Index (PMI) Nexus: China and the USA

Mei-Chih Wang and Tsangyao Chang ()
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Mei-Chih Wang: Providence University, Taiwan

Asian Economic and Financial Review, 2019, vol. 9, issue 8, 913-925

Abstract: This study examines the lead-lag effect between the Chinese and US purchasing managers? index (PMI), and the West Texas Intermediate (WTI) crude oil prices for the period from January 2007 to April 2017 by adopting the wavelet theory model. The results show that oil prices were affected by the Chinese PMI in the long term after 2013, when China became the largest crude oil importer worldwide, bur supplies were greater than demand. In contrast, while the US PMI affected oil prices between 2008 and 2012, its dependence on foreign crude oil supplies declined, and thus its imports, afterwards. These results reveal crucial policy implications for both China and the United States. It also shows a structural change in oil prices and its role in the market between China and the United States.

Keywords: West Texas Intermediate (WTI); US Purchasing Managers? Index (PMI); Chinese Purchasing Managers? Index (PMI); US Producer Price Index (PPI); Chinese Producer Price Index (PPI); Wavelet Theory (search for similar items in EconPapers)
JEL-codes: A10 O40 Q43 (search for similar items in EconPapers)
Date: 2019
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Handle: RePEc:asi:aeafrj:2019:p:913-925