Inflationary effect of oil-price shocks in an imperfect market: A partial transmission input-output analysis
This paper aims to examine the impacts of oil-price shocks on China's price levels. To that end, we develop a partial transmission input-output model that captures the uniqueness of the Chinese market. We hypothesize and simulate price control, market factors and technology substitution - the three main factors that restrict the functioning of a price pass-through mechanism during oil-price shocks. Using the models of both China and the U.S., we separate the impact of price control from those of other factors leading to China's price stickiness under oil-price shocks. The results show a sharp contrast between China and the U.S., with price control in China significantly preventing oil-price shocks from spreading into its domestic inflation, especially in the short term. However, in order to strengthen the economy's resilience to oil-price shocks, the paper suggests a gradual relaxing of price control in China.
Year of publication: |
2011
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Authors: | Wu, Libo ; Li, Jing ; Zhang, ZhongXiang |
Publisher: |
Milano : Fondazione Eni Enrico Mattei (FEEM) |
Subject: | Oil-price Shocks | Price Transmission | Price Control | Input-output Analysis | Inflation | Industrial Structure | China | the United States |
Saved in:
freely available
Series: | Nota di Lavoro ; 29.2011 |
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Type of publication: | Book / Working Paper |
Type of publication (narrower categories): | Working Paper |
Language: | English |
Other identifiers: | 655957340 [GVK] hdl:10419/53282 [Handle] |
Classification: | Q43 - Energy and the Macroeconomy ; Q41 - Demand and Supply ; Q48 - Government Policy ; O13 - Agriculture; Natural Resources; Energy; Environment; Other Primary Products ; O53 - Asia including Middle East ; P22 - Prices ; E31 - Price Level; Inflation; Deflation |
Source: |
Persistent link: https://www.econbiz.de/10010279509