The Impact of Oil Price Shocks on Chinese Industries

Abstract

There is little research on the impact of oil prices (OPs) on industries, especially for developing countries. This article uses a structural vector autoregression model to empirically examine the impact of OP shocks on key economic variables for five industries in China that consume huge amounts of oil. The results show that a positive OP shock leads to significant profit increases for the petroleum and natural gas extraction industry and has positive effects on its investment; the impact on the petroleum processing industry is exactly the opposite. Owing to shock transmission, rising OPs will not significantly affect the manufacture of raw chemical materials and chemical products and of non-metallic mineral products. OP shocks have a long-term negative effect on the road transportation industry, although this effect is relatively small.

Keywords:

• China
• industries
• oil prices (OPs)
• OP shocks
• SVAR model

Notes

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