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On the China factor in the world oil market: A regime switching approach
Citation
Cross, JL and Hou, CH and Nguyen, BH, On the China factor in the world oil market: A regime switching approach, Energy Economics, 95 Article 105119. ISSN 0140-9883 (2021) [Refereed Article]
Copyright Statement
© 2021 Elsevier B.V. All rights reserved
DOI: doi:10.1016/j.eneco.2021.105119
Abstract
We investigate the relationship between China's macroeconomic performance and the world oil market over the past two decades. Unlike existing studies, we allow for possible regime changes by utilizing a class of Markov-switching vector autoregression (MS-VAR) models. The model identifies key regime changes in the structural shocks when the oil market experiences low and high volatility. We find that demand shocks from China and the rest of the world have a larger impact on the real price of crude oil during periods of high volatility. Supply shocks, in contrast, have a large effect on the price in the low volatility regime. A similar state-dependent phenomenon is observed for the impact of oil price shocks on China economic activity, however the size of these responses is relatively small. Thus, despite China being a major player in international oil markets, we conclude that oil market shocks tend to have little impact on China's real GDP growth.
Item Details
Item Type: | Refereed Article |
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Keywords: | China, oil prices, MSVAR, Markov-switching VARs, sign restrictions |
Research Division: | Economics |
Research Group: | Applied economics |
Research Field: | Macroeconomics (incl. monetary and fiscal theory) |
Objective Division: | Economic Framework |
Objective Group: | Macroeconomics |
Objective Field: | Economic growth |
UTAS Author: | Nguyen, BH (Dr Bao Nguyen) |
ID Code: | 147485 |
Year Published: | 2021 |
Web of Science® Times Cited: | 3 |
Deposited By: | Economics and Finance |
Deposited On: | 2021-11-04 |
Last Modified: | 2022-01-17 |
Downloads: | 0 |
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