Oil Price Shocks: Macroeconomic Influence And The Adjustment Of Monetary Policy

In 20^th century two oil crises caused great loss to the world. However, the monetary policy did not play its role as one of the main macro-control means at that time. It can be attributed to two reasons. One is that the money authorities didn't understand the role of monetary policy well. The other is that researches on monetary policy rules relatively lagged behind. In recent 20 years an important breakthrough for money economics and monetary policy analysis is on the researches of monetary policy rules. It has been shown from the game model for monetary policy (Barro and Gordon, 1983) that rules are better than discretion in the long term. Though rules are kinds of restrictions for the money authorities, they compel monetary policy to set up undertaking regime. As a result, opportunism and short-term profits trend can be avoided and social welfare be improved. What's more, the new Keynes model for general equilibrium, which is characterized by forward-looking and staggered price, has been established. This promotes researches on the monetary policy rules when economy is suffering from the outside shocks.Based on those, the dissertation does a systematic study on the oil price in the world, which includes character, transmission mechanism, oil price-GDP elasticity, the role of monetary policy and rales choice in China when oil price shocks. Different from the two oil crises before, the oil price shocks happened at the beginning of this century did not cause great loss to our country. This is mainly because of the role of oil pricing mechanism, productive capacity surplus and energy consumption composition etc. On the whole, Chinese GDP decreases less than 0.1% when the oil price in the world increases by 10%. So the rise of the oil price has no much influence on Chinese economy but it can be never neglected. It is same with the other countries that the monetary policy in China made the real output decline further though it had less negative effects when oil price shocks. If the money authorities operate according to inflation targeting, it is worse than price targeting. If the money authorities operate according to Taylor rule, it is the best choice to take CPI as the foundation of inflation determination and there exists different influence on the economy given inflation and output gap different weight.The innovations of the dissertation mainly include the following aspects. First, it uses three state Markov Regime Switching model to depict the change of the oil price in the world and calculate the length of its cycle. Second, it analyzes deeply the transmission mechanism and obstacles from the international oil price to our economy. Third, it makes use of ARDL model and error-correcting model to estimate the elasticity of the oil demand and calculate the influence on our economy. Fourth, it borrows structure VAR model to study the negative role of the contracted monetary policy on the real output when oil price shocks. Fifth, it summarizes the monetary policy rules with oil price shocks by the numbers.