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China’s government spending and global inflation dynamics: The role of the oil price channel

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  • Zhang, Wen

Abstract

This paper explores the international spillover effects of China’s government spending onto global inflation dynamics and the role of the oil price channel in the transmission process based on a monthly dataset covering 20 OECD economies spanning from January 2000 to September 2021. Based on the estimation results of Large Bayesian VAR models this paper provides three novel findings to the literature. Firstly, China’s government spending expansion significantly raises the CPI of most OECD economies. Secondly, the oil price rises significantly in response to China’s government spending expansion and magnifies its spillover effect on global CPI inflation. Thirdly, the effect of the oil price channel on the international transmission of China’s government spending to the global inflation dynamics crucially depends on the oil import dependence rate and the energy subsidies of the shock recipient countries.

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  • Zhang, Wen, 2022. "China’s government spending and global inflation dynamics: The role of the oil price channel," Energy Economics, Elsevier, vol. 110(C).
    • Handle: RePEc:eee:eneeco:v:110:y:2022:i:c:s0140988322001633
    DOI: 10.1016/j.eneco.2022.105993
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    More about this item

    Keywords

    International fiscal spillover; Oil price; Global inflation;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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