The Asymmetric Impact Studies Of Crude Oil Price Fluctuation On China's Economy

Crude oil is an important raw material for industrial production, especially in China, which is undergoing rapid economic growth and upgrading industrial structure reform. Literature of recent years started to pay attention to the asymmetric impact of crude oil price fluctuation on the economy. After comparing empirical results of asymmetrical model with traditional symmetric model, it is found that oil price fluctuation is more asymmetric elastic in realistic economic situation, and more powerful in explaining the real economy.In this paper, Cointegration analysis and VEC model were used to establish a multiple regression model to study whether the asymmetry existed among oil price fluctuation, output, prices, money supply and unemployment, both in long term and short term. The empirical results show that the world's crude oil prices has significant asymmetric effects on China's growth rate of industrial added value:with the use of symmetrical modeling, crude oil price fluctuation's elasticity of China's growth rate of industrial added value is about -0.023, while with the asymmetric model, the results show that the elasticity of positive and negative oil price fluctuations were around -0.05 and 0.025 respectively, and also, the explanatory power of asymmetrical model increased from 0.487 to 0.629. Thus, the result of asymmetric approach is more reliable. In addition, the empirical results also show that the decline in crude oil prices and the biggest contribution to output growth occurred at 2th and 3th period. The empirical results suggested that the government should take full account of crude oil price fluctuation on economic growth and the lagged effect of elasticity asymmetry in price adjustments and monetary policy, so as to develop appropriate "asymmetric" regulation and policy to minimize negative impacts of oil price fluctuations on China's economy.