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China's oil product pricing mechanism: What role does it play in China's macroeconomy?

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  • Zhang, Jin
  • Xie, Mingjia

Abstract

The oil product pricing mechanism is a regulation system that was introduced in the late 1990s to control the oil product prices in China. For the first time to our knowledge, we provide an empirical evaluation of this regulation system, with a particular focus on its role in China's macroeconomy. Based on monthly data between 2000 and 2013, we find that: (i) contrary to the general public's impression, the mechanism is ‘fair’ overall in the sense that it responds to the rise and fall of international oil price symmetrically; (ii) the effect of the mechanism on the Chinese economy, however, is very limited; and (iii) the limited effect of the mechanism holds for different levels of regulation during the studied period, suggesting that potential deregulation may have little impact on the economy.

Suggested Citation

  • Zhang, Jin & Xie, Mingjia, 2016. "China's oil product pricing mechanism: What role does it play in China's macroeconomy?," China Economic Review, Elsevier, vol. 38(C), pages 209-221.
    • Handle: RePEc:eee:chieco:v:38:y:2016:i:c:p:209-221
    DOI: 10.1016/j.chieco.2016.02.002
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    4. Wen, Xiaoqian & Bouri, Elie & Roubaud, David, 2018. "Does oil product pricing reform increase returns and uncertainty in the Chinese stock market?," The Quarterly Review of Economics and Finance, Elsevier, vol. 68(C), pages 23-30.
    5. Ru Sha & Tao Ge & Jinye Li, 2022. "How Energy Price Distortions Affect China’s Economic Growth and Carbon Emissions," Sustainability, MDPI, vol. 14(12), pages 1-27, June.
    6. Chen, Xiaoguang & Ye, Jingjing, 2017. "When the Wind Blows: Spatial Spillover Effects of Urban Air Pollution," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258256, Agricultural and Applied Economics Association.
    7. Bouri, Elie & Chen, Qian & Lien, Donald & Lv, Xin, 2017. "Causality between oil prices and the stock market in China: The relevance of the reformed oil product pricing mechanism," International Review of Economics & Finance, Elsevier, vol. 48(C), pages 34-48.
    8. Brueckner, Markus & Haidi Hong, Haidi & Vespignani, Joaquin, 2023. "Effects of Government Regulation of Diesel and Petrol Prices on GDP Growth: Evidence from China," MPRA Paper 122869, University Library of Munich, Germany.
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    More about this item

    Keywords

    International oil price; Oil product price; Price regulation; China; VAR;
    All these keywords.

    JEL classification:

    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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