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Price causal relations between China and the world oil markets

  • Chen, K.C.
  • Chen, Shaoling
  • Wu, Lifan
Registered author(s):

    This paper examines China's influence on the volatility of crude oil prices in the international markets. Using data from 1997-2007, we find that China has little impact on the volatility of the world crude oil markets. On the contrary, our evidence shows that the crude oil price innovations in China are significantly driven by the OPEC and US markets, which account for 42-59% of the oil price variations in total. Our results indicate that although China emerges to be an important player, it has not yet correspondingly become an oil pricing power in the world oil markets.

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    Article provided by Elsevier in its journal Global Finance Journal.

    Volume (Year): 20 (2009)
    Issue (Month): 2 ()
    Pages: 107-118

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    Handle: RePEc:eee:glofin:v:20:y:2009:i:2:p:107-118
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620162

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    1. Johansen, S., 1991. "Determination of Cointegration Rank in the Presence of a Linear Trend," Papers 76a, Helsinki - Department of Economics.
    2. Lanza, Alessandro & Manera, Matteo & Giovannini, Massimo, 2005. "Modeling and forecasting cointegrated relationships among heavy oil and product prices," Energy Economics, Elsevier, vol. 27(6), pages 831-848, November.
    3. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    4. Christopher A. Sims, 1986. "Are forecasting models usable for policy analysis?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-16.
    5. Lance J. Bachmeier & James M. Griffin, 2006. "Testing for Market Integration: Crude Oil, Coal, and Natural Gas," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 55-72.
    6. S. Gurcan Gulen, 1997. "Regionalization in the World Crude Oil Market," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 109-126.
    7. Andrew N. Kleit, 2001. "Are Regional Oil Markets Growing Closer Together?: An Arbitrage Cost Approach," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 1-15.
    8. Henrik Hansen & Søren Johansen, 1999. "Some tests for parameter constancy in cointegrated VAR-models," Econometrics Journal, Royal Economic Society, vol. 2(2), pages 306-333.
    9. S. Gurcan Gulen, 1999. "Regionalization in the World Crude Oil Market: Further Evidence," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 125-139.
    10. Cooley, Thomas F. & Leroy, Stephen F., 1985. "Atheoretical macroeconometrics: A critique," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 283-308, November.
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