OIL PRICE SHOCKS, INFLATION, AND CHINESE MONETARY POLICY

2017 ◽  
Vol 23 (1) ◽  
pp. 1-28 ◽  
Author(s):  
Yunqing Wang ◽  
Qigui Zhu ◽  
Jun Wu
Keyword(s):  
Monetary Policy ◽  
Chinese Economy ◽  
Oil Price ◽  
New Keynesian ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
Price Inflation ◽  
Core Inflation ◽  
Dynamic Stochastic ◽  
The Business Cycle

This paper proposes a New Keynesian dynamic stochastic general equilibrium model of the Chinese economy incorporating the demand of oil to study the effects of oil price shocks on the business cycle. The model answers several questions, including how monetary policy should respond to the disturbances from such shocks, and whether monetary authorities should use core inflation or headline inflation including oil price inflation as the monetary policy rule. The contributions could be summarized as follows: First, the model reveals that the oil transmission mechanism is determined by the nominal inertia, income effect, and the portfolio allocation effect. Second, both noncore inflation monetary policy and core inflation monetary policy that are simultaneously pegged to oil prices fluctuations are inferior to the monetary policy purely pegged to core inflation. Our findings suggest that the monetary policy should focus on core inflation instead of headline inflation.

Monetary policy and the effect of the transfer of oil prices to inflation

2020 ◽  
pp. 41-50
Author(s):  
Ph. S. Kartaev ◽  
I. D. Medvedev
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Dynamic Models ◽  
Oil Prices ◽  
Oil Price ◽  
Oil Price Shocks ◽  
Negative Effects ◽  
Price Shocks ◽  
Policy Regime ◽  
The Impact

The paper examines the impact of oil price shocks on inflation, as well as the impact of the choice of the monetary policy regime on the strength of this influence. We used dynamic models on panel data for the countries of the world for the period from 2000 to 2017. It is shown that mainly the impact of changes in oil prices on inflation is carried out through the channel of exchange rate. The paper demonstrates the influence of the transition to inflation targeting on the nature of the relationship between oil price shocks and inflation. This effect is asymmetrical: during periods of rising oil prices, inflation targeting reduces the effect of the transfer of oil prices, limiting negative effects of shock. During periods of decline in oil prices, this monetary policy regime, in contrast, contributes to a stronger transfer, helping to reduce inflation.

A financial CGE model analysis: Oil price shocks and monetary policy responses in China

2015 ◽  
Vol 51 ◽  
pp. 534-543 ◽  
Author(s):  
Jing-Yu Liu ◽  
Shih-Mo Lin ◽  
Yan Xia ◽  
Ying Fan ◽  
Jie Wu
Keyword(s):  
Monetary Policy ◽  
Model Analysis ◽  
Oil Price ◽  
Cge Model ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
Policy Responses

scholarly journals Oil Price Shocks, Systematic Monetary Policy and Economic Activity

2019 ◽  
Vol 58 (1) ◽  
pp. 65-81 ◽  
Author(s):  
Muhammad Zeshan ◽  
Wasim Shahid Malik ◽  
Muhammad Nasir
Keyword(s):  
Monetary Policy ◽  
Jel Classification ◽  
Oil Price ◽  
Oil Price Shocks ◽  
Structural Vector Autoregression ◽  
Price Shocks ◽  
Output Loss ◽  
The Impact ◽  
Auto Regression ◽  
Structural Vector

This study quantifies the impact of oil price shocks and the subsequent monetary policy response on output for Pakistan. It employs a quarterly Structural Vector Auto-regression framework for the period 1993–2015. It first discovers that Hamilton’s (1996) Net Oil Price Increase indicator appropriately reveals most of the oil price shocks hitting Pakistan’s economy. We find that a contractionary monetary policy, resulting from the oil price shocks, contributes to significant output loss in Pakistan. After encountering the Lucas critique, the present study finds that around 42 percent of the output loss is due to the ensuing tight monetary policy. This suggests that the central bank of Pakistan can reduce the impact of oil price shocks by reducing its intervention in the market. JEL Classification: E1, E3, E5 Keywords: Oil Price Shocks, Monetary Policy, Structural Vector Autoregression

scholarly journals Globalization, Endogenous Oil Price Shocks and Chinese Economic Activity

2017 ◽  
Vol 22 (2) ◽  
pp. 39-64
Author(s):  
Gulzar Khan ◽  
Adiqa Kiani ◽  
Ather Maqsood Ahmed
Keyword(s):  
Open Economy ◽  
Aggregate Demand ◽  
Small Open Economy ◽  
Oil Prices ◽  
Chinese Economy ◽  
Oil Price ◽  
Economic Conditions ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
Macroeconomic Activity

Using a structural vector autoregressive model, this study investigates the extent to which international oil price shocks have influenced the Chinese economy over the period 1991–2014. Given China’s intensified macroeconomic activity and its increasing demand for energy resources, we also examine the endogenous response of international oil prices to economic conditions in the country. To that end, we derive and empirically estimate a small open-economy New Keynesian model for China and the rest of the world. Our results show that the Chinese economy is relatively more sensitive to global economic conditions than to domestic policy actions. Global productivity shocks appear to be the most important variable causing Chinese macroeconomic activity through trade, where oil prices impact aggregate demand negatively.

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