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Measuring The Effects Of Oil Prices On China'S Economy: A Factor-Augmented Vector Autoregressive Approach

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  • Francois Lescaroux
  • Valerie Mignon

Abstract

The aim of this paper is to investigate the impacts of oil prices on the Chinese economy. To this end, we rely on the factor-augmented vector autoregressive methodology, which allows us to evaluate the response of various macroeconomic variables to an oil price shock. Our results suggest that an oil price shock leads to: (i) a contemporaneous increase in consumer and producer price indexes, inducing a rise in interest rates; (ii) a delayed negative impact on GDP, investment and consumption; and (iii) a postponed increase in coal and power prices. Copyright 2009 The Authors. Journal compilation 2009 Blackwell Publishing Asia Pty Ltd

Suggested Citation

  • Francois Lescaroux & Valerie Mignon, 2009. "Measuring The Effects Of Oil Prices On China'S Economy: A Factor-Augmented Vector Autoregressive Approach," Pacific Economic Review, Wiley Blackwell, vol. 14(3), pages 410-425, August.
  • Handle: RePEc:bla:pacecr:v:14:y:2009:i:3:p:410-425
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    Cited by:

    1. Imran Shah, 2012. "Revisiting the Dynamic Effects of Oil Price Shock on Small Developing Economies," Bristol Economics Discussion Papers 12/626, Department of Economics, University of Bristol, UK.
    2. Liu, Zheng & Spiegel, Mark M. & Tai, Andrew, 2017. "Measuring the effects of dollar appreciation on Asia: A FAVAR approach," Journal of International Money and Finance, Elsevier, vol. 74(C), pages 353-370.
    3. Alexei Onatski & Francisco Ruge‐Murcia, 2013. "Factor Analysis Of A Large Dsge Model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 28(6), pages 903-928, September.
    4. Chen, Guifu & Hamori, Shigeyuki, 2009. "Energy prices and China’s international competitiveness," MPRA Paper 18827, University Library of Munich, Germany.
    5. Alom, Fardous, 2011. "Economic Effects of Oil and Food Price Shocks in Asia and Pacific Countries: An Application of SVAR Model," 2011 Conference, August 25-26, 2011, Nelson, New Zealand 115346, New Zealand Agricultural and Resource Economics Society.
    6. An, Lian & Jin, Xiaoze & Ren, Xiaomei, 2014. "Are the macroeconomic effects of oil price shock symmetric?: A Factor-Augmented Vector Autoregressive approach," Energy Economics, Elsevier, vol. 45(C), pages 217-228.
    7. Naser, Hanan & Ahmed, Abdul Rashid, 2016. "Oil Price Shocks and Stock Market Performance in Emerging Economies: Some Evidence using FAVAR Models," MPRA Paper 77868, University Library of Munich, Germany.
    8. repec:eee:eneeco:v:65:y:2017:i:c:p:411-423 is not listed on IDEAS
    9. Fernald, John G. & Spiegel, Mark M. & Swanson, Eric T., 2014. "Monetary policy effectiveness in China: Evidence from a FAVAR model," Journal of International Money and Finance, Elsevier, vol. 49(PA), pages 83-103.
    10. Valérie Mignon, 2009. "Les liens entre les fluctuations du prix du pétrole et du taux de change du dollar," Revue d'Économie Financière, Programme National Persée, vol. 94(1), pages 187-195.
    11. Zhang, Jin & Xie, Mingjia, 2016. "China's oil product pricing mechanism: What role does it play in China's macroeconomy?," China Economic Review, Elsevier, vol. 38(C), pages 209-221.
    12. Peter Baláz & Lukáš Harvánek, 2016. "Competitiveness of the Chinese Economy and its Link to the Global Energy Prices Development," International Journal of Energy Economics and Policy, Econjournals, vol. 6(2), pages 305-317.
    13. Spiegel, Mark M. & Tai, Andrew, 2017. "International Transmission of Japanese Monetary Shocks Under Low and Negative Interest Rates: A Global Favar Approach," Working Paper Series 2017-8, Federal Reserve Bank of San Francisco.
    14. repec:eee:jbfina:v:86:y:2018:i:c:p:1-20 is not listed on IDEAS
    15. Broadstock, David C. & Filis, George, 2014. "Oil price shocks and stock market returns: New evidence from the United States and China," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 33(C), pages 417-433.
    16. Degiannakis, Stavros & Filis, George & Floros, Christos, 2013. "Oil and stock price returns: Evidence from European industrial sector indices in a time-varying environment," MPRA Paper 80495, University Library of Munich, Germany.
    17. Degiannakis, Stavros & Filis, George & Floros, Christos, 2013. "Oil and stock returns: Evidence from European industrial sector indices in a time-varying environment," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 26(C), pages 175-191.

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