The Contagion Effect Of Coal And Electricity Linkage From The Perspective Of Price Stickiness

In order to solve the contradiction between coal and electricity, coal and electricity linkage policy was issued at the end of2004. It has been implemented seven times since then. But the effect of this policy is not obvious. Considering CPI and macroeconomic factors, the implemention of the policy gradually changed. For example, linkage amplitude does not reach the designated position and the policy are not implemented in time which cause the policy can barely carry on and coal-fired power enterprises facing its own management trouble. Base on the improved input-output price model, this paper measured the consequence which was brought to other industries and CPI by coal industry under two scenarios which are the price of coal and electricity are not linked and the price of coal and electricity are linked to testify if CPI is the main reason stopped the policy and put forward corresponding countermeasure to alleviate the contradiction between coal and electricity.Input-output price model of this paper is based on the traditional input-output price model.A price stickiness parameter was added to the traditional input-output price model which can more accurate specify the impaction brought to other industries when the price of one industry rises.This paper used the capability of transmitting cost index to present price stickiness parameter. One improvement of the capability of transmitting cost index in this paper is the distinction of the structure intermediate inputs and labor force as a cost was considered. According to the empirical estimates of47industry price for10years we find that competitive industries have smaller price stickiness and monopoly industries are bigger than former one. The price stickiness of service industries are smallest among three.This paper used2002and2007input-output table and the input-output price model to estimate the result of the policy when the price of coal rose100%. Also the result was compared with the scenario that the price of coal and electricity are not linked so as to find out the feasibility and problems of the policy. The results show that it has a bigger impact on related downstream industries of coal and electricity such as metal smelting rolling processing industry and chemical industry under both scenarios. Especially under scenario that the price of coal and electricity are linked, in addition to the industries mentioned above and the price of residents service and mental mining industry soared a bit. Under the scenario of coal and electricity linkage bigger impact were on overall price and the prices of the electric industry should responsible for sharply rose of CPI. When coal price rose100percent,the CPI rose by2.5percent almost. Thus it is concluded that the main reason of the policy be stopped lies in the coal price soar along with electricity will cause a huge impact on the CPI and the macro economic.