An Empirical Analysis On The Role Of International Oil Prices And RMB Real Exchange Rate In China's Economy

Despite a lively debate on the importance of international oil prices and thereal effective exchange rate for China's economy, little empirical research has beenconducted on this topic. In this paper, the impact of international oil prices and thereal effective exchange rate on China's GDP and the government fiscal revenues areanalysed using vector autoregressive modelling and cointegration techniques. Theresults imply that there are long-run equilibrium relationships of the real effectiveexchange rate and international oil prices respectively with GDP and the governmentfiscal revenues. In addition, the short-run fluctuations of international oil prices andthe real effective exchange rate also significantly influence GDP and the governmentfiscal revenues.