Price causal relations between China and the world oil markets

Is world oil market “one great pool”?: An example from China's and international oil markets

“…5 From the perspective of volatility transmission and spillover, neither in-sample nor out-ofsample supports the hypothesis of market integration. This result is consistent with the evidence in Chen et al (2009) who use a VAR-based variance decomposition and find that the effects of world oil market volatility on Chinese oil market volatility are very weak.…”

The Co-movement Between Chinese Oil Market and Other Main International Oil Markets: A DCC-MGARCH Approach

“…Investigating the volatility forecasting of crude oil prices, Wei et al (2010) capture the volatility features of two crude oil markets-Brent and West Texas Intermediate (WTI) using a greater number of GARCH class models (e.g., FIGARCH, HYGARCH). Besides, Chen et al (2009) employ data in seven crude oil markets across the world for the period between 1997 and 2007 using a DAG model to measure the volatility of crude oil prices between China and international markets and show that the crude oil price innovations in China are significantly driven by the OPEC and US markets. Reboredo (2011) examine how oil prices co-move for the WTI-Brent, WTI-Dubai, WTI-Maya and Dubai-Maya pairs using several copula models with different conditional dependence structures and time-varying dependence parameters and the findings suggest that crude oil prices are linked with the same intensity during bull and bear markets.…”

An investigation into the dynamic relationship between international and China’s crude oil prices

“…Furthermore, in the literature, it is often stated that the Chinese oil market does not affect the volatility of other markets (e.g. Chen, Chen, and Wu 2009). However, based on our findings of nonlinear Granger causality tests, oil price shocks in China would generally have causal impacts on the international markets.…”

“…1 A detailed survey discussing this issue can be found in Mu and Ye (2011). international markets. If oil price shocks in China are driven by outside markets but not vice versa (Chen, Chen, and Wu 2009), then China is just a price taker in the international markets. However, if China's oil price can influence international prices, then China would become a source of oil price volatility for the international markets.…”

“…An analysis of both the cointegration relationship and the adjustment dynamics can help determine the degree of market integration (Warell 2006). A few previous studies, such as Jiao et al (2004), Chen, Chen, and Wu (2009), Guo and Zhang (2009), and Li and Leung (2011), found evidence of cointegration between international and China's crude oil prices by using linear cointegration tests that assume symmetric adjustments. However, linear tests may suffer from power loss if the adjustment is in fact nonlinear.…”