The Effects Of Fluctuation Of Oil Price On China Economic Fluctuation

Oil is an un-renewable resource.As the blood of modern industry,oil has important impacts on development of all countries.With economic growth,China's economic dependence on oil is strengthened.For a long time,oil price fluctuations have very complicated effects on China's economic fluctuations.Researching on effects of oil price fluctuations on China's economic fluctuations is of important significance on sustained and healthy development of China's economy under the "new normal".Therefore,after literature review section and methodology section,MF-DFA method is used to analyse the complexity of industrial economic fluctuations in consideration of effects of oil price fluctuations.MF-DCCA method is used to analyse effects of oil price fluctuations on high frequency daily fluctuations of industrial economy.Neoclassical DSGE model and New Keynesian DSGE model are constructed to analyse effects of oil shocks on low frequency cyclical fluctuations of China's macro economy.Many existing literatures generally consider that two different types of source for multifractality in time series:multifractality due to different long-range temporal correlations for small and large fluctuations and multifractality related to the fat-tailed probability distributions of variations.Few of them consider the impact of oil price fluctuations.To figure out whether oil effect is a source of multifractality,we compare the multifractality strength of original series and the returns series without crude oil returns impact,which is generated by,VAR model in section 4,"a research on the complexity of industrial economic fluctuations in consideration of the effects of oil price fluctuations using MF-DFA method".It's found out that the multifractality strength of original series is stronger than the returns series without the crude oil returns impact.This means the impact of oil price fluctuations is a source for multifractality of stock market,reflecting that oil price fluctuations have effects on complexity(multifractality)of China's industry economy.To analyse the impact of oil price fluctuations on the China's economic high-frequency daily fluctuations from aspects of industrial economics,China's industrial economic fluctuations is measured by the fluctuations of sector stock markets in section 5,"a research on impact of oil price fluctuations on the China's industrial economic high-frequency daily fluctuations using MF-DCCA method".It's found that oil price fluctuations and China's industrial economic fluctuations are cross-correlated through cross-correlation test.The empirical results obtained through the MF-DCCA method imply that multifractality exists in the cross-relations between WTI crude oil and the ten sector stock markets.The industries ordered by multi fractal ity strength from strong to weak are as follows:energy,financials,telecommunication services,industrials,utilities,materials,consumer discretionary,information technology,healthcare,consumer staples.The cross-correlations between WTI crude oil and sector stock markets in China displayed stronger complexity(multifractality)indicating that the cross-correlations were easier to be affected by large and small fluctuations.They are more connected.It is nearly impossible to predict the future prices based on the history of the other markets and the future prices in energy sector stock market is the most unpredictable based on the history of the WTI crude oil markets,followed by the future prices in financial sector stock.By comparing the strength of multifractality for original data and residual errors of VAR model,we get a conclusion that the vector auto-regression(VAR)model could not be used to describe the dynamics of the cross-correlations between WTI crude oil and Chinese ten sector stock markets.Nonlinear methods are appealing.To analyse the impact of oil price fluctuations on the Chinese economic fluctuations from aspects of macroeconomics,the oil price fluctuations are measured by oil price shocks and the DSGE models are built.Based on the neoclassical assumptions including monetary neutrality,perfectly competitive market and flexible price,a DSGE model is built in section 6 "a research on impact of oil price shocks on the China's macroeconomic fluctuations,based on a neoclassical DSGE model”.Concerning the situation in China,public revenue variable,public consumption variable,public investment variable and the oil as an important input are incorporated into the model.After logarithmic linearization,parameters calibration,the impulse response analysis is conducted.It shows that the oil price shocks have negative impacts on output,private consumption,private investment and wage and have positive impacts on nominal interest rate and labor.Then,based on the New Keynesian assumptions,including monetary non-neutrality,monopolistic competition and sticky prices,a DSGE model on the basis of the situation in China is built in section 7,"a research on impact of oil price shocks on the China's macroeconomic fluctuations,based on a New Keynesian DSGE model".To estimate the structural parameters of the model,the parameter calibration method and the Bayesian estimation method are applied.The results obtained through the variance decomposition method imply that impacts of technology shocks and labors are the main sources of Chinese economic cyclical fluctuations.Investment adjustment cost shocks and monetary policy shocks are the important sources.The results obtained through the historical decomposition method imply that the cyclical fluctuations of output are dominated by investment adjustment cost shocks and monetary policy shocks.The cyclical fluctuations of inflation are dominated by investment adjustment cost shocks,monetary policy shocks and price make-up shocks.The results obtained through impulse response analysis imply that oil price shocks have positive impacts on inflation rate,nominal interest rate,labor,capital return and have negative impacts on output,private consumption,private investment,wage and capital.Stagflation will appear.Although the oil price shocks affect the macroeconomic fluctuations through monetary policy,but the main routes is still non-monetary.This result is contrary to many studies abroad,but reflects the actual situation in China.