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Title:Inflationary effect of oil-price shocks in an imperfect market: A partial transmission input-output analysis PDF Logo
Authors:Wu, Libo
Li, Jing
Zhang, ZhongXiang
Issue Date:2011
Series/Report no.:Nota di lavoro // Fondazione Eni Enrico Mattei: Sustainable development 29.2011
Abstract:This paper aims to examine the impacts of oil-price shocks on China's price levels. To that end, we develop a partial transmission input-output model that captures the uniqueness of the Chinese market. We hypothesize and simulate price control, market factors and technology substitution - the three main factors that restrict the functioning of a price pass-through mechanism during oil-price shocks. Using the models of both China and the U.S., we separate the impact of price control from those of other factors leading to China's price stickiness under oil-price shocks. The results show a sharp contrast between China and the U.S., with price control in China significantly preventing oil-price shocks from spreading into its domestic inflation, especially in the short term. However, in order to strengthen the economy's resilience to oil-price shocks, the paper suggests a gradual relaxing of price control in China.
Subjects:Oil-price Shocks
Price Transmission
Price Control
Input-output Analysis
Inflation
Industrial Structure
China
the United States
JEL:Q43
Q41
Q48
O13
O53
P22
E31
Document Type:Working Paper
Appears in Collections:FEEM Working Papers, Fondazione Eni Enrico Mattei

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