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The relationship between global oil price shocks and China's output: A time-varying analysis

Cross, J and Nguyen, BH 2017 , 'The relationship between global oil price shocks and China's output: A time-varying analysis' , Energy Economics, vol. 62 , pp. 79-91 , doi: 10.1016/j.eneco.2016.12.014.

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We employ a class of time-varying Bayesian vector autoregressive (VAR) models on new standard dataset of China's GDP constructed by Chang et al. (2015) to examine the relationship between China's economic growth and global oil market fluctuations between 1992Q1 and 2015Q3. We find that: (1) the time varying parameter VAR with stochastic volatility provides a better fit as compared to it's constant counterparts; (2) the impacts of intertemporal global oil price shocks on China's output are often small and temporary in nature; (3) oil supply and specific oil demand shocks generally produce negative movements in China's GDP growth whilst oil demand shocks tend to have positive effects; (4) domestic output shocks have no significant impact on price or quantity movements within the global oil market. The results are generally robust to three commonly employed indicators of global economic activity: Kilian's global real economic activity index, the metal price index and the global industrial production index, and two alternative oil price metrics: the US refiners' acquisition cost for imported crude oil and the West Texas Intermediate price of crude oil.

Item Type: Article
Authors/Creators:Cross, J and Nguyen, BH
Keywords: oil prices, China, TVP-VAR-SV
Journal or Publication Title: Energy Economics
Publisher: Elsevier Science Bv
ISSN: 0140-9883
DOI / ID Number: 10.1016/j.eneco.2016.12.014
Copyright Information:

Copyright 2016 Elsevier B.V. All rights reserved.

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