The Study On Interaction Between Energy Price And General Price Level

Energy is a key element in economic activities. As a raw material and an extremely important factor input, its price influences many aspects of the economic system.Recently, energy price has become a leading and hot topic. Most of the literatures focus on the relationship between the prices of single energy (such as oil or coal, etc.) and inflation. But a systematic study on comprehensive energy prices, which is used in the article "Kerosene and Electricity Prices", implies that the economic system is not significant, especially using a single energy price index in an empirical analysis.In my opinion, being a systematic course for energy, it is more important in structuring and researching energy price from a comprehensive field. Therefore, this study will be based on the prior analyses by empirical study, systematically studying the relationship between the energy price and the general price which uses the comprehensive national energy price index instead of the individual energy price. A tentative analysis shows the energy price shocks impact on the general price and the feedback effects from an overall perspective. The hope of this study is that it can provide reference, inspiration and constructive suggestions for further research and by comparing the transmission mechanism between the energy price and the general price; we can provide some policy recommendations for China Energy Market reform.The following research is formed from six chapters:1. Background and Reason:This is essentially a summary and overview on prior research about the energy price and the relationship between the energy price and the economic system.2. Energy Price Volatility Motivation:This chapter is an overview on prior research about the energy price movement and analyzing the price transmission from a theoretical point of view. 3. The Relationship among the Energy Price, PPI and CPI:A key chapter in the reading, the author describes how the transmission mechanism context and perspective came out based on the recent research. He also hypothesizes on the research conducted.4. Study VAR Model:This chapter seeks to describe the appropriate methods and models of this research and evaluates its suitability.5. Empirical Process and its Result Analysis:Through the empirical analysis, VAR models are built based on the data during 2000 to 2010. This chapter also discusses the conducting process of the unit root test, Granger Causality Analysis and Impulse response function analysis.6. Through the VAR model, the following conclusions:The relationship between the energy prices and the general price level is a two-way transmission. Because of the Chinese energy market--energy price controlling, energy demand in China and other related items--price transmission cannot be conducted smoothly. The following suggestions are implementation of energy conservation, market pricing of energy, and diversification of energy sources.