Effects of fluctuations in international oil prices on China’s price level based on VAR model

Abstract

The article studies the mechanism of the international oil prices impact on China’s prices from the perspective of empirical quantitative analysis, through the establishment of Vector Autoregressive model concluding that international oil price fluctuations affect China’s prices by the purchasing price of raw material, fuel and power, but with the extension of industry chain, its influence on PPI and CPI will gradually diminish. Through empirical analysis of specific eight categories of CPI indices, it is concluded that the maximum one of the effects of international oil price on consumer prices is transportation and communication class, followed by tobacco alcohol and supplies class, clothing class, health care and personal products class as well as residence class, then is family equipment supplies and maintenance services class, then for food class, entertainment education cultural goods class and services class are very small. Based on this, the article puts forward some corresponding countermeasures and suggestions.

Keywords:

• International Oil Prices
• Price Index
• VAR Model