Exogenous Supply Shock, Endogenous Monetary Policy And The Stability Of The Economic Growth

Since 1970s two oil crisis, Economists are taking great efforts on research the oil price shock, as a representative of supply shock, on the macro economy, especially the impact of economic growth. The existing research have consensus in the following two aspects:first, the supply shock will bring down output level and bring up the prices level.second, after entering the 21st century, the adverse effect of supply shocks to macro economy is becoming more and more weak. But there are variance when the empirical research try to explain the two phenomena.Some economists think supply shock will make enterprise production costs rising, and the cost-driven inflation will arrival, and then cause spiral inflation, the high cost and low profits will eventually leading to the output falling and prices rising, then sluggish is coming up. Other economists, represented by Bernank, think the supply shock will led the monetary authority to choose the tighten monetary policy, While this is tighter monetary policy caused the output falling, prices rising, and the sluggish. And because of the monetary policy progress continuously, the influence of supply shocks on economic effect is reducing.Empirical research Based on the different country will have different conclusion, the differences of conclusion is also led to different policy Suggestions. So it is particularly important to research the impact of supply shock for China's macroeconomic and the role of monetary policy. Through a structural vector regression model (SVAR), this paper tests the impact of international crude oil price shocks to Chinese macroeconomic and the conduction mechanism. The empirical results show that the international oil price shocks can lead to output decline and prices rise, comparing with the result of oil prices shock under the hypothesis of exogenous monetary policy, we found the tighten monetary policy is the main reasons of sluggish. Then we divided our research samples into two sections, We found that, in the later period the macroeconomic performance is better than the former, the empirical results show that the main reason is that, in the later period Monetary authorities to implement the loose monetary policy after the tight monetary policy, improved macroeconomic operation performance. However, the macroeconomic performance under these two kinds of monetary policy is no good as the exogenous monetary policy.