How Well Can a New Keynesian Model with Oil Price Shocks Explain the Behavior or the Chinese Economy^

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Title: How Well Can a New Keynesian Model with Oil Price Shocks Explain the Behavior or the Chinese Economy^
Authors: Wu, Mingche
Date: 2014-12-31
Abstract: By the year of 2013, China has become the second largest oil comsumer in the world with an annual consumption of 20.74 quadrillion Btu. In contrast with numerous studies for developed countries the research focusing on the relation between the oil price and developing countries, such as China, is just getting started. In order to analyze the impact of the oil price shocks on the Chinese economy. Jian, Li and Zheng (2010) construct a New Keynesian model with oil price stocks. However, since their study is mainly focusing on the theoretical mechanisms, the cyclical properties of that model are not reported in their paper. In this study, I simulate the model of Jian, Lin and Zheng (2010) and conduct a comparison of the cyclical properties between this model and the Chinese actuat data, to see how well such a New Keynesian model can explain the behavior of the Chinese economy. The results show that the differences between the model and the Chinese actual data are significant in terms of the predicted correlation. In order to improve this model, three possible approaches are suggested based on the facts of the modern energy industry.
URL: http://hdl.handle.net/10393/32041
CollectionScience économique - Mémoires // Economics - Research Papers
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