Abstract： The analysis of the influence of oil price change on the macroeconomic environment is of great significance both in theory and in policy area, which this paper attempts to make.Based on the method of short term constraints SVAR model, the real macro-economic conditions of China are considered in the study as the background.And for the detailed further analysis, taking the Kilian (2008) for reference, the paper decomposes the shock of oil price fluctuation into three kinds, namely the oil demand shock, the oil supply shock, and the oil specific-demand shock.
The paper, using the 1994-2015 macro data of China as an example, analyzes the effects of the international oil price fluctuations, the three structural shocks to be specific, during the 1994-2015 period on the China’s industrial added value, real effective exchange rate, as well as the price level. Also considered in the study are the impacts which China’s macro economy received from the asymmetric shocks of the three forms mentioned above and both before and after the reform on the exchange rate.
The empirical results show that 1. The international oil price volatility has significant impacts on the price level in China. The oil price rise has larger impacts on the depreciation of the RMB exchange rate than on the industrial added value, and this latter impact is rather vague. 2. The impact of the oil price shocks on the macroeconomic variables is significantly enhanced after the reform on exchange rate mechanism, and the impact of specific demand shocks is greater after the reform as well. 3. The impact of the oil price on the economic output is larger during its rise than during its decline stage. By analyzing the effects of oil shocks on China’s macroeconomic environment, the paper makes suggestions on policy reforms for the government to consider.
In order to effectively deal with the impacts of oil price specific demand shocks on the macro economy and their impact on inflation, appropriate policies need to be in place, the mechanism for oil price reform needs to be perfected at an earlier time, and the construction of new petroleum reserve system as well as the improvement on the existing facilities need to b accelerated.
Key Words: soil price composition; price level; real effective exchange rate；the volatility of international oil price; macroeconomic variables