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.
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Bibliographic InfoPaper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2011.29.
Date of creation: Mar 2011
Date of revision:
Oil-price Shocks; Price Transmission; Price Control; Input-output Analysis; Inflation; Industrial Structure; China; the United States;
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," Economics Study Area Working Papers 115, East-West Center, Economics Study Area.
- 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-2011-05-14 (All new papers)
- NEP-ENE-2011-05-14 (Energy Economics)
- NEP-HME-2011-05-14 (Heterodox Microeconomics)
- NEP-TRA-2011-05-14 (Transition Economics)
You can help add them by filling out this form.
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