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Crude Oil Prices: China’s Influence Over 1996-2011

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Abstract

Industrial production and liquidity in China and liquidity in other major countries are introduced into the Kilian (2009) model identifying the supply and demand side factors driving real oil price changes. It is recognized that China’s real liquidity may proxy for real income increase in China. Unanticipated increases in China’s liquidity cause large significant increases in real oil prices that persist. Positive innovations to G3 liquidity raise real oil price by much smaller amounts before eroding. Following a sharp fall late in 2008 real oil price rose strongly during 2009-2010. This rise is associated with shocks from China’s liquidity during 2009 and recovered global demand for industrial commodities during 2010. Global demand for industrial commodities reacts positively to China’s industrial production and liquidity.

Suggested Citation

  • Ratti, Ronald A & Vespignani, Joaquin L., 2012. "Crude Oil Prices: China’s Influence Over 1996-2011," Working Papers 15728, University of Tasmania, Tasmanian School of Business and Economics, revised 17 Dec 2012.
  • Handle: RePEc:tas:wpaper:15728
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    Cited by:

    1. Ratti, Ronald A. & Vespignani, Joaquin L., 2013. "Crude oil prices and liquidity, the BRIC and G3 countries," Energy Economics, Elsevier, vol. 39(C), pages 28-38.
    2. Kang, Wensheng & Ratti, Ronald A. & Vespignani, Joaquin L., 2016. "Chinese liquidity increases and the U.S. economy," Economic Modelling, Elsevier, vol. 52(PB), pages 764-771.
    3. Biresselioglu, Mehmet Efe & Yelkenci, Tezer, 2016. "Scrutinizing the causality relationships between prices, production and consumption of fossil fuels: A panel data approach," Energy, Elsevier, vol. 102(C), pages 44-53.
    4. Śmiech, Sławomir & Papież, Monika & Dąbrowski, Marek A., 2015. "Does the euro area macroeconomy affect global commodity prices? Evidence from a SVAR approach," International Review of Economics & Finance, Elsevier, vol. 39(C), pages 485-503.
    5. Dungey, Mardi & Vehbi, Tugrul, 2015. "The influences of international output shocks from the US and China on ASEAN economies," Journal of Asian Economics, Elsevier, vol. 39(C), pages 59-71.
    6. Ratti, Ronald A. & Vespignani, Joaquin L., 2015. "OPEC and non-OPEC oil production and the global economy," Energy Economics, Elsevier, vol. 50(C), pages 364-378.
    7. Vespignani, Joaquin L. & Ratti, Ronald A., 2016. "Not all international monetary shocks are alike for the Japanese economy," Economic Modelling, Elsevier, vol. 52(PB), pages 822-837.
    8. Vespignani, Joaquin L. & Ratti, Ronald A., 2013. "Chinese Monetary Expansion and the US Economy," Working Papers 16874, University of Tasmania, Tasmanian School of Business and Economics, revised 05 Aug 2013.
    9. repec:eee:reveco:v:50:y:2017:i:c:p:136-174 is not listed on IDEAS
    10. repec:eee:eneeco:v:67:y:2017:i:c:p:49-59 is not listed on IDEAS
    11. repec:eco:journ2:2017-03-21 is not listed on IDEAS
    12. Kang, Wensheng & Ratti, Ronald A. & Vespignani, Joaquin L., 2014. "Liquidity expansion in China and the U.S. economy," MPRA Paper 59338, University Library of Munich, Germany.

    More about this item

    Keywords

    Oil price; China's global influence; Oil price and liquidity;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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