Inflationary effect of oil-price shocks in an imperfect market: a partial transmission input-output analysis
AbstractThis paper aims to examine the impacts of oil-price shocks on China’s price levels. To that end, we develop a partial transmission input-output model that captures the uniqueness of the Chinese market. We hypothesize and simulate price control, market factors and technology substitution - the three main factors that restrict the functioning of a price pass-through mechanism during oil-price shocks. Using the models of both China and the U.S., we separate the impact of price control from those of other factors leading to China’s price stickiness under oil-price shocks. The results show a sharp contrast between China and the U.S., with price control in China significantly preventing oil-price shocks from spreading into its domestic inflation, especially in the short term. However, in order to strengthen the economy’s resilience to oil-price shocks, the paper suggests a gradual relaxing of price control in China.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by East-West Center, Economics Study Area in its series Economics Study Area Working Papers with number 115.
Length: pages 41
Date of creation: Mar 2011
Date of revision:
Other versions of this item:
- Wu, Libo & Li, Jing & Zhang, ZhongXiang, 2013. "Inflationary effect of oil-price shocks in an imperfect market: A partial transmission input–output analysis," Journal of Policy Modeling, Elsevier, vol. 35(2), pages 354-369.
- Libo Wu & Jing Li & ZhongXiang Zhang, 2011. "Inflationary Effect of Oil-Price Shocks in an Imperfect Market: A Partial Transmission Input-output Analysis," Working Papers 2011.29, Fondazione Eni Enrico Mattei.
- Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
- Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply
- Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
- O13 - Economic Development, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
- O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
- P22 - Economic Systems - - Socialist Systems and Transition Economies - - - Prices
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-04-02 (All new papers)
- NEP-CBA-2011-04-02 (Central Banking)
- NEP-ENE-2011-04-02 (Energy Economics)
- NEP-HME-2011-04-02 (Heterodox Microeconomics)
- NEP-MON-2011-04-02 (Monetary Economics)
- NEP-TRA-2011-04-02 (Transition Economics)
You can help add them by filling out this form.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Brenda Higashimoto).
If references are entirely missing, you can add them using this form.