The dynamic effects of oil supply shock on China: Evidence from the TVP-Proxy-VAR approach

Changchun Pan, Yuzhe Huang and Chien-Chiang Lee ()

Socio-Economic Planning Sciences, 2024, vol. 95, issue C

Abstract: This study examines how changes in oil supply impact oil prices and China's macroeconomy. We developed an estimator that uses OPEC's institutional characteristics and high-frequency data to identify an oil supply surprise shock. This oil supply surprise is then incorporated as an exogenous variable into a TVP Proxy VAR model to analyze the effects of oil supply shocks on China's economy. Our findings indicate that negative oil supply shocks lead to higher oil prices, which in turn cause increases in China's interest rates and inflation, a decline in stock prices, a short-term rise in exports, and a long-term decrease in industrial output. When considering time-varying model parameters, we found that periods with larger oil supply shocks have a more pronounced impact on the macroeconomy. Our research provides empirical evidence for a better understanding of the effects of energy supply fluctuations.

Keywords: TVP proxy VAR; Oil supply shock; External instruments; High-frequency identification; OPEC announcements (search for similar items in EconPapers)
JEL-codes: C32 E31 E32 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0038012124002258
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:soceps:v:95:y:2024:i:c:s0038012124002258

DOI: 10.1016/j.seps.2024.102026

Access Statistics for this article

Socio-Economic Planning Sciences is currently edited by Barnett R. Parker

More articles in Socio-Economic Planning Sciences from Elsevier
Bibliographic data for series maintained by Catherine Liu ().