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The Effect of Oil Price on China's Exports

Listed author(s):
  • João Faria

    (IPED - Institute for Policy and Economic Development - University of Texas-El Paso)

  • André Mollick

    (CoBA - College of Business Administration - University of Texas-Pan American)

  • Pedro Albuquerque

    ()

    (Euromed Marseille - École de management - Association Euromed Management - Marseille, DEFI - Centre de recherche en développement économique et finance internationale - Université de la Méditerranée - Aix-Marseille 2 - Faculté des Sciences Economiques)

  • Miguel León-Ledesma

    (School of Economics - University of Kent)

The 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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Paper provided by HAL in its series Post-Print with number halshs-00747033.

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Date of creation: Dec 2009
Publication status: Published in China Economic Review, Elsevier, 2009, 20 (4), pp.793-805. <10.1016/j.chieco.2009.04.003>
Handle: RePEc:hal:journl:halshs-00747033
DOI: 10.1016/j.chieco.2009.04.003
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00747033
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

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