China's Exports and the Oil Price
AbstractThe increase in oil prices in recent years has occurred concurrently with a rapid expansion of Chinese exports in the world markets, despite China being an oil importing country. In this paper we develop a theoretical model that explains the positive correlation between Chinese exports and the oil price. The model shows that Chinese growth can lead to an increase in oil prices that has a stronger impact on its export competitors. This is due to the large labor force surplus of China. We then examine this hypothesis by estimating a reduced form equation for Chinese exports using Rodrik (2006)’s measure of export competitiveness, together with the oil price, productivity, real exchange rate, and foreign industrial production over the monthly 1992-2005 period. The results suggest a stable relationship and yields slightly positive values for the price of oil and elastic coefficients for export competitiveness, along with the expected negative elasticity for the real exchange rate.
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Bibliographic InfoPaper provided by Department of Economics, University of Kent in its series Studies in Economics with number 0812.
Date of creation: Nov 2008
Date of revision:
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Postal: Department of Economics, University of Kent at Canterbury, Canterbury, Kent, CT2 7NP
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Find related papers by JEL classification:
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-11-25 (All new papers)
- NEP-CNA-2008-11-25 (China)
- NEP-DEV-2008-11-25 (Development)
- NEP-ENE-2008-11-25 (Energy Economics)
- NEP-OPM-2008-11-25 (Open Economy Macroeconomics)
- NEP-TRA-2008-11-25 (Transition Economics)
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