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The impact of rising international crude oil price on China's economy: an empirical analysis with CGE model

  • Ying Fan
  • Jian-Ling Jiao
  • Qiao-Mei Liang
  • Zhi-Yong Han
  • Yi-Ming Wei

Many studies, as well as historical events, indicate that oil price shocks affect the macro economy of a country. In this paper we build a Chinese Computable General Equilibrium (CGE) model, with which we simulate the impact on the Chinese economy of international crude oil price when it rises by 5%, 10%, 20%, 40%, 50% and 100%. Simulation also identifies the effects of low/medium/high technological advances in the crude oil mining, petroleum and chemical and transportation sectors on fighting the risk of oil price shocks. The results indicate that international crude oil price has negative effects on Chinese real GDP, investment, consumption, import and export, amongst a range of economic indices. Technological advances have positive effects on fighting back the risk of oil price shocks, especially the technological advances in petroleum and chemicals, whilst the transportation sector has a greater effect on resisting oil price risk. An international oil price hike holds more disadvantages for rural residents' welfare. These results would be valuable reference information for policy makers.

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Article provided by Inderscience Enterprises Ltd in its journal Int. J. of Global Energy Issues.

Volume (Year): 27 (2007)
Issue (Month): 4 ()
Pages: 404-424

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Handle: RePEc:ids:ijgeni:v:27:y:2007:i:4:p:404-424
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