The Impact Of International Commodity Price Shocks On China's Economic Volatility

International commodity prices have been volatile in recent years,and will continue.Studying the effect of international commodity prices shocks on China’s economic fluctuations will help to explain the causes of China’s economic fluctuations,predict future economic trends,cope with external shocks,and maintain steady economic growth.First,a dynamic AD-AS model including exchange rate and hybrid monetary rule is constructed,and the effect of the overall international commodity prices shocks on China’s major macroeconomic indicators are analysed.The results show that the overall commodity prices shocks mainly affect inflation followed by nominal interest rate,real interest rate and output through aggregate supply.The effect on inflation is positive,stronger,high sensitivity and long duration,while the effect on output is negative,weak,low sensitivity and short duration.Considering the main role of energy in commodities and its important influence on China’s production field,the DSGE model including the Taylor rule and the Calvo staggered price is constructed to analyse energy price shocks on China’s economic fluctuations.The results show that the negative effect of energy prices on output and consumption is stronger than the positive effect on inflation and nominal interest rate.Compared with the overall international commodity price shocks,the effect of energy price shocks on output is stronger.In order to reduce the effect of international commodity prices shocks on China’s economic fluctuations,suggestions are put forward as follows: the international commodity reserve mechanism should be formed by governments and enterprises,the early warning system of international commodity price shocks should be improved,enterprises should be encouraged to reduce the dependence on international commodity through technological progress,and enterprises should be encouraged to use financial derivatives to avoid the risk of commodity trading.