Research Of Macroeconomic Effects Caused By Oil Price Shocks And Construct The Pre-warning Knowledge System

Oil price market is a typical complex system. High consumption dependence, scarcity and uneven distribution made oil price be easily influenced by many factors, such as economic situations, international relations, emergent affairs, financial speculation, as well as fundamental factors like supply and demand. Even minor mutual interactions among these factors can induce unexpected outcomes, which will cause a severe shock on oil price. Meanwhile, the macroeconomic effects caused by oil price shocks become more and more prominent. Hamilton had pointed out that seven out of eight economic depressions were accompanied with high oil price since World War II to 1983. Growing gap between supply and demand as well as rising oil price has threatened China's oil price security and macroeconomic security. The macroeconomic effects caused by oil price shock have become an unavoidable practical problem.Pre-warning is an effective method to protect oil price security and economic stability. However, a large number of empirical results show that, current crisis pre-warning theory can not fully explore the drive mechanism of international oil price shocks, and it can not thoroughly discover the performance features of the effects on macroeconomy of oil price shocks. In that case the current pre-warning system is not applicable for the analysis of macroeconomic impacts caused by oil price shocks.The study of this paper is built on the basis of a new pre-warning theory--data mining (DM) technology and artificial intelligence (AI) theory are added to construct a pre-warning knowledge base to find the relationship between oil price shock and macroeconomy. The main task of this paper is to give a rigorous theoretical analysis, and perform an applied research on the impacts of oil price shocks on macroeconomy. With the real-time monitor of oil price and macroeconomic situation, we can intervene and adjust the unstable factors of oil price shocks and macroeconomy, in order to minimize the negative effects on macroeconomy caused by oil price shocks. The main innovations and researches are as follows:(1) Weekly WTI oil prices are used for exploring the hidden periodicity features of oil price shocks. Results show that, the minimum period of one oil price shock is about four weeks (nearly one month), which is the periodic basis for pre-warning knowledge system. In addition, the period of large-scale oil crisis is about 12 years. Apart from the interval of 1973 and 1978 crisis is 5 years, the periods of the other two crises are all 12 years (1978, 1990, and 2002).(2) With AHHDOD algorithm, the macroeconomic impacts of oil price shocks will be depicted as the"Outlier"features of macroeconomic data sets, and the number of outliers is used to measure the sensitivity of macroeconomy to oil price shocks. Through the international comparison, we can explore the different sensitivity of different countries to the oil price shocks. Results show that, China is the most subject one to the oil price shock, followed by India, Japan, and America. Oil price shock affected China's GDP, CPI, and gross imports and exports, among which the gross imports and exports are the most affected area.(3) Quantify the relationship between oil price shock and macroeconomy with event study method to answer the question: to what extent will oil price shock affect macroeconomy?"Simultaneously, select the countries which economic trends are similar with China when oil price rising and dropping. It can be concluded that, oil price rising and dropping caused asymmetrical impacts to China's macroeconomy. Rising oil price shocks produce more impacts than dropping ones. On the other hand, India is the country whose macroeconomy fluctuate similar as China when oil price rising, while EU is the region whose macroeconomy fluctuate similar as China when oil price dropping.(4) Ontology is added into case-based reasoning for constructing the pre-warning knowledge base for the relationship between macroeconomy and oil price shocks. The knowledge sharing capability of ontology and the self-learning and self-adaptive capability of case-based reasoning are feasible for knowledge base construction. When type in"Storm disaster", the case retrieve system can find out the cases of"Hurricane Ivan hit Gulf of Mexico"and"inclement weather reduced the oil production in North Sea", all of which are the individuals of the same class"environment". Additionally, we introduced the Multi-Galois Lattice (MGL) to enhance the recall and precision ratios during case retrieving. Results show that, the similarities of the cases retrieved by MGL are higher than those which are retrieved by the traditional method, which illustrates that the whole operation of MGL is vivid. (5) Taking case study on the pre-warning knowledge base of the macroeconomic impacts of the oil price shocks, to verify its effectiveness. Firstly, the paper makes some early warning for the possible macroeconomic impacts of oil price shocks caused by economic crisis and natural disasters. Results show that, the early warning signals are basically consistent with the actual trend of the macroeconomy, which shows the feasibility of the pre-warning knowledge base. Additionally, MGL retrieve algorithm is compared with the traditional retrieve algorithm called Interval retrieve algorithm, in order to prove that MGL is prior than Interval retrieve algorithm in enhancing the recall and precision ratios during case retrieving. At last, we take appreciation of RMB as a background to warn whether the oil price shock will affect China's macroeconomy. The results indicate that, the appreciation of RMB will first and for most affect China's international trade. The exports will decrease. It is the best way to expand domestic demand, which can not only transfer the excess produce capacity, but also allowing consumers enjoy the benefits of appreciation. Further more, RMB appreciation will attract a lot of foreign currency coming into China, and causing inflation. We have to increase the threshold of foreign currency exchange with RMB, in order to prevent speculative capital impacts on our macroeconomy.