Crude Oil Prices: China’s Influence Over 1996-2011

Ronald Ratti and Joaquin Vespignani

No 15728, Working Papers from University of Tasmania, Tasmanian School of Business and Economics

Abstract: Industrial production and liquidity in China and liquidity in other major countries are introduced into the Kilian (2009) model identifying the supply and demand side factors driving real oil price changes. It is recognized that China’s real liquidity may proxy for real income increase in China. Unanticipated increases in China’s liquidity cause large significant increases in real oil prices that persist. Positive innovations to G3 liquidity raise real oil price by much smaller amounts before eroding. Following a sharp fall late in 2008 real oil price rose strongly during 2009-2010. This rise is associated with shocks from China’s liquidity during 2009 and recovered global demand for industrial commodities during 2010. Global demand for industrial commodities reacts positively to China’s industrial production and liquidity.

Keywords: Oil price; China's global influence; Oil price and liquidity (search for similar items in EconPapers)
JEL-codes: E31 E32 Q43 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2012-12-17, Revised 2012-12-17
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published by the University of Tasmania. Discussion paper 2012-10

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Related works:
Working Paper: Liquidity and Crude Oil Prices: China’s Influence Over 1996-2011 (2012)
Working Paper: Liquidity and crude oil prices: China’s influence over 1996-2011 (2012)
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