File(s) under permanent embargo
On the China factor in the world oil market: A regime switching approach
journal contribution
posted on 2023-05-21, 03:43 authored by Cross, JL, Hou, CH, Bao NguyenBao NguyenWe 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.
History
Publication title
Energy EconomicsVolume
95Article number
105119Number
105119Pagination
1-13ISSN
0140-9883Department/School
TSBEPublisher
Elsevier Science BvPlace of publication
Po Box 211, Amsterdam, Netherlands, 1000 AeRights statement
© 2021 Elsevier B.V. All rights reservedRepository Status
- Restricted