The Impact Of International Oil Price Shocks On China's Economic Activities

As the blood of our modern industrial economy,oil is one of the most important strategic resource in the world.It also play an important role on economic development and people's living standards.With the rapid and stable development of China's economy, the oil demand is also increasing year by year.In 2009,the total crude oil imports are more than two million tons.while the dependence on foreign oil reached more than 51.3%.It also means that more than half of China's oil consumption needs to be imported from abroad.In this situation,the international oil price changes have a significant impact on China's economy.So it's important to study the impact of the international oil price changes on China's macro-economy,and it can help us to formulate a more rational scientific policy recommendations to enhance the government's macro-control effects.This article is based on international oil prices and China's macro-economic variables (consumer price index,interest rates.exchange rates.industrial output and stock returns),through the multi-threshold VAR model.then use variance decomposition and impulse response function method to analyze the impact. In order to build a multi-threshold model,first we should test the impact is symmetry or asymmetry.Here we use the prediction variance and least squares estimation to establish a hypothesis testing.The result is that the threshold effect exists.Then,based on Weise(1999) criteria,with the R software we can determine the threshold level.Finally.through the VAR model,using variance decomposition and impulse response function method to analyze the impact,while the impact of international oil price variables are divided into two parts.Empirical results show that the impact of the international oil price shock on China's macro-economy exist threshold effect.It also mean that the impact is asymmetry.And the threshold level is slightly larger than 0,indicating that the China's economy has some capacity on the impact of oil prices.According to the variance decomposition and impulse response function results,the impact of the oil changes less than the threshold level is greater than the impact of the oil changes larger than the threshold level.The results also show that the impact on China's stock market and exchange rate is significant negative,whether the oil changes large than the threshold level or not.Finally,there ara a number of policy recommendations to reduce the impact of international oil price on China's economy.