Oil price shocks and their short- and long-term effects on the Chinese economy

dc.contributor.author Tang, Weiqi en_US
dc.contributor.author Wu, Libo en_US
dc.contributor.author Zhang, ZhongXiang en_US
dc.date.accessioned 2009-05-15T01:20:34Z
dc.date.available 2009-05-15T01:20:34Z
dc.date.issued 2009-04 en_US
dc.description For more about the East-West Center, see <a href="http://www.eastwestcenter.org/">http://www.eastwestcenter.org/</a> en_US
dc.description.abstract A considerable body of economic literature shows the adverse economic impacts of oil-price shocks for the developed economies. However, there has been a lack of empirical study of this kind on China and other developing countries. This paper attempts to fill this gap by answering how and to what extent oil-price shocks impact China's economy, emphasizing on the price transmission mechanisms. To that end, we develop a structural vector auto-regressive model. Our results show that an oil-price increase negatively affects output and investment, but positively affects inflation rate and interest rate. However, with the differentiated price control policies for materials and intermediates on the one hand and final products on the other hand in China, the impact on real economy, represented by real output and real investment, lasts much longer than that to price/monetary variables. Our decomposition results also show that the short-term impact, namely output decrease induced by the cut of capacity-utilization rate, is greater in the first one to two years, but the portion of the long-term impact, defined as the impact realized through an investment change, increases steadily and exceeds that of short-term impact at the end of the second year. Afterwards, the long-term impact dominates, and maintains for quite some time. en_US
dc.format.extent 28 p. en_US
dc.identifier.uri http://hdl.handle.net/10125/8130
dc.language.iso en-US en_US
dc.publisher Honolulu: East-West Center en_US
dc.relation.ispartofseries East-West Center working papers. Economics series ; no. 102 en_US
dc.subject.lcsh Petroleum products – Prices – China - Econometric models en_US
dc.subject.lcsh China - Economic conditions - 2000- en_US
dc.subject.lcsh Petroleum industry and trade - Economic aspects – China - Econometric models en_US
dc.title Oil price shocks and their short- and long-term effects on the Chinese economy en_US
dc.type Papers en_US
dc.type.dcmi Text en_US
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