The Impact Of International Oil Price Fluctuations On China’s Macro-economy

The first oil crisis had an adverse impact on western developed countries with high oil consumption.Since then,the relationship between oil prices and the economy has been paid attention to and studied.Since the 21 st century,many emerging developing countries have experienced rapid economic development,and at the same time,oil prices have been soaring.The influencing factors behind oil prices have quietly changed.As the largest developing country,China’s oil demand continues to rise,and it is now the world’s second largest oil consumer,with an import dependence rate of over 70%.The increasing import volume has gradually brought domestic oil prices into line with international oil prices.Frequent fluctuations in international oil prices inevitably make Chinese scholars worry that China’s economy will be impacted by fluctuations in international oil prices.However,some studies have shown that recent oil price increases have not brought about a severe economic downturn like the first oil crisis,which inevitably makes the correlation between oil prices and the economy confusing.As China’s high demand for oil will not disappear in a short period of time,along with economic fluctuations under the epidemic,changes in the global oil supply sector,and global climate pressures,it is of practical significance to understand the relationship between oil prices and macroeconomics.Based on the commodity and financial attributes of oil,this article theoretically analyzes the factors affecting oil price fluctuations from supply factors,demand factors,speculative factors and other factors.Then it analyzes the impact of oil price fluctuations on the macro economy based on the theory of the aggregate supply aggregate demand curve of macroeconomics.The empirical research is divided into two parts.The first part uses the SVAR model,using monthly OECD currency volume,global oil supply,OECD industrial production,Chinese industrial production,non-commercial positions in the oil futures market,and WTI oil price data from January 1999 to September 2020,to study whether various factors have an impact on oil price fluctuations and the extent of their impact.In the second part,the oil price shock separated by the first part is regressed with the monthly Chinese import commodity prices,producer prices,consumer prices,currency volume,total retail sales of consumer goods,fixed asset investment,exports,and quarterly GDP data,to study the impact of oil price shocks on China’s various macroeconomic variables.Research indicates,1.The speculative factor became the main contributor to the high oil price in 2008 with a contribution ratio of 31%;the contribution of global oil supply to oil price fluctuations is small,and the contribution of China’s economic demand to oil price fluctuations continues to increase.2.The increase in oil supply caused a year-on-year decline in domestic CPI,but did not cause economic growth;With the increase of global liquidity,the domestic price level rises,M2 rises,and GDP rises year-on-year;Growth in foreign industrial output led to tighter monetary policy at home,and GDP fell year-on-year.3.The impact of a 1% year-on-year increase in domestic industrial production caused an average year-on-year increase in GDP growth of 0.5%.4.Under the impact of speculative behavior,domestic price levels have not changed significantly,and the economy has not been strongly affected.5.After the 2008 financial crisis,the negative impact of oil price fluctuations on China’s macro economy has become smaller.Based on the research conclusions,this article puts forward the following policy recommendations.1.The government appropriately controls oil prices in the face of speculative behavior and special shocks to oil prices.2.In the face of liquidity and oil supply shocks,the government adopted a corresponding expansionary monetary policy.3.Improve the quality of domestic products to boost the domestic economy in response to foreign demand shocks.4.Reasonable introduction of the competition mechanism,the decision of oil price to the market,the government plays more of the role of supervision.5.Increase domestic oil production,and plan to control and reduce the amount of oil used to move towards sustainable development.