Inflationary Effect of Oil-Price Shocks in an Imperfect Market: A Partial Transmission Input-Output Analysis

Wu, Libo; Li, Jing; Zhang, ZhongXiang

doi:10.2139/ssrn.1802483

Cited by 6 publications

(8 citation statements)

References 15 publications

(3 reference statements)

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“…Due to its escalating volume of oil consumption, increasing dependence on oil imports, and gradually liberalizing, domestic, oil pricing mechanism, researchers have expected a more active interaction between the world oil price and China's macro-economy (Du et al, 2010;Wu et al, 2013). Therefore, not surprisingly, China is a good case to study the role of market distortion and oil price shocks.…”

Section: Fuel Pricing Mechanism and Price Distortion In Chinamentioning

confidence: 99%

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Energy price, regulatory price distortion and economic growth: A case study of China

2017

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Energy prices are often distorted by government control, which is usually justified on the grounds that such control will help mitigate the negative impact of price volatility from oil imports, and thus positively affect the domestic economy. In this paper, we show in a two-sector growth model, that regulatory price distortion can negatively affect the economy, and then, based on the model, we empirically estimate the impact of the price distortion on output growth in China, using monthly, time series data from 2005M1 to 2012M12. In contrast to the usual argument for regulatory control to mitigate price volatility, we find that regulatory price distortion negatively affects output growth in China during both the short and long term, because it is robust to different measures of output and price distortion. Hence, the argument that using price regulation to protect economic growth is undermined, and subsequently, this study lends its support to energy price deregulation. A market oriented, energy price regime may improve the resilience of the domestic economy to global, oil price shocks.

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Section: Fuel Pricing Mechanism and Price Distortion In Chinamentioning

confidence: 99%

“…In addition, price controls, such as subsidies or taxes, themselves negatively affect a domestic economy. A number of studies show that energy price distortion hurts economic growth (Tang et al, 2010;Wu et al, 2013).…”

Section: The Modelmentioning

confidence: 99%

Energy price, regulatory price distortion and economic growth: A case study of China

2017

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“…Investigations on OPEC news announcements (Schmidbauer & Rösch, 2012), on inventory announcements (Hui, 2014) and analyzing volatility spillovers (Belgacem, et al 2014) were each using daily returns. It was shown that oil price shocks are capable to increase inflation (Libo Wu, et al 2011) and has negative effects on oil importing as well as oil exporting countries (Zhang, et al 2017;Kilian & Vega, 2011).…”

Section: Literature Reviewmentioning

confidence: 99%

“…High oil price volatility levels are also described as a "fundamental barrier to economic growth, due to its damaging and destabilizing effects on the macroeconomy" (Ebrahim, et al 2014) and they are equivalent to high risk and unpredictability in energy markets. Crude oil prices are influenced by a wide range of factors (Libo Wu, et al 2011;EIA, 2015) and different geopolitical and global events are supposed to affect energy prices significantly (Kilian, 2010;Namboodiri, 1983;Triki & Affes, 2011). However, not all of them occur spontaneously, many of them are scheduled and released on a regular basis: macroeconomic news announcements.…”

Section: Introductionmentioning

confidence: 99%

Ranking of US macroeconomic news impacting WTI crude oil volatility risk

Faseli

2019

IJRBS

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This study had the purpose to investigate the impact of 38 scheduled major United States (US) macroeconomic news on WTI crude oil intraday volatility for the period 2012-2018. It was the aim to provide a news ranking that indicates upcoming high volatility episodes at a specific point in time. The West Texas Intermediate (WTI) light crude oil represents a benchmark since it has a signal effect on market players. High crude oil price volatility is a measure of risk and known to increase inflation, to affect producers, consumers, and investors and to destabilize economic growth. In this research approach one-minute high-frequency bid close prices provided the basis for a 1h window rolling standard deviation. Data modeling was performed using simple and multiple robust ordinary least squares (OLS) regression performed with programming language Python. The model successfully identified 21 significant news announcements in both, the simple and multiple regression models, however, simple OLS-regression appears to be more sensitive. It also provided a ranking of US news impacting WTI volatility risk. The results support the prediction of approaching high price volatility and thus, display an opportunity for market participants and decision-makers to minimize risk.

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“…Wu et al [17] develop a partial transmission input-output model to examine the impacts of sectoral price control policies on oil price pass-through into China's aggregate price level. Jiang and Tan [18] use an input-output model to analyze the impacts of energy subsidies reform on different industries and general price indexes.…”

Section: Introductionmentioning

confidence: 99%

Electricity-savings pressure and electricity-savings potential among China’s inter-provincial manufacturing sectors

Xiao

Chevallier

et al. 2016

Energy Syst

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The Inter-Regional Input Output (IRIO) model is developed in 11 manufacturing sectors of China's 30 provincial-level regions. Against the background of electricity pricing and energy-savings, this paper develops and compares the relative sectoral and regional price sensitivities to electricity price and elasticities to electricity demand. The results show that industries such as metal smelting, oil and chemical processing are more sensitive to increasing electricity prices, and have a higher potential of energy-savings. Remarkable findings hold for the regions of Tianjin, Hebei, Jilin, Guangdong, Zhejiang, Shaanxi and Shandong.

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Inflationary Effect of Oil-Price Shocks in an Imperfect Market: A Partial Transmission Input-Output Analysis

Cited by 6 publications

References 15 publications

Energy price, regulatory price distortion and economic growth: A case study of China

Energy price, regulatory price distortion and economic growth: A case study of China

Ranking of US macroeconomic news impacting WTI crude oil volatility risk

Electricity-savings pressure and electricity-savings potential among China’s inter-provincial manufacturing sectors

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