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Asymmetric effects of oil prices and exchange rates on China’s industrial prices

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  • Zhu, Huiming
  • Chen, Xiuyun

Abstract

This paper explores the impacts of positive and negative changes in crude oil price and exchange rate variables on raw material procurement prices and product ex-factory prices of China’s industrial enterprises. We run the nonlinear autoregressive distributed lag (NARDL) model for the full sample from January 2000 to June 2019, and find the existence of the cointegrating relationships and the asymmetries of the long-run effects from positive and negative changes in oil price and exchange rate variables. Then, we run the OLS and quantile regressions for the two subsamples. Through the analysis of the estimates in different quantities in the latter model, we obtain rich and novel findings. The main findings include the inconsistency between the practice of oil price and exchange rate transmissions in China and the usual theoretical explanations, and the active roles of China’s oil product mechanism and exchange rate policy reforms in mitigating transmission distortions. In addition, we also find other asymmetries such as the asymmetric effects in different locations of dependent variable’s conditional distribution, and the different effects on raw material prices and product ex-factory prices from the same independent variables.

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  • Zhu, Huiming & Chen, Xiuyun, 2019. "Asymmetric effects of oil prices and exchange rates on China’s industrial prices," Energy Economics, Elsevier, vol. 84(C).
    • Handle: RePEc:eee:eneeco:v:84:y:2019:i:c:s0140988319303469
    DOI: 10.1016/j.eneco.2019.104551
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    More about this item

    Keywords

    Oil prices; Exchange rates; Raw material procurement prices; Product ex-factory prices; Asymmetric effects; NARDL; Quantile regression;
    All these keywords.

    JEL classification:

    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance

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