Time‐varying effects and structural change of oil price shocks on industrial output: Evidence from China's oil industrial chain

Chen, Jin‐Yu; Lee, Seonjoo; Zhong, Meirui

doi:10.1002/ijfe.1970

Cited by 11 publications

(6 citation statements)

References 56 publications

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“…In fact, the crude oil price movement is mainly driven by economic demand (Ding et al, 2022;Gong et al, 2021Gong et al, , 2022Kilian, 2009). Similarly, Chen et al (2021) also find the effects of oil price shocks on output from upstream to downstream in the Chinese oil industrial chain are mostly driven by oil demand shock. Therefore, the economic demand may endogenously correlate with the firms' business activities, which is difficult for us to identify the causal link between oil price change and firms' labour investment.…”

Section: Introductionmentioning

confidence: 84%

The oil price plummeted in 2014–2015: Is there an effect on Chinese firms' labour investment?

Liu

Shu-xian

et al. 2022

Int. J Fin Econ

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Using the exogenous event of oil price sharp decline in 2014–2015, this paper employs the difference‐in‐difference method to establish a causal link between the oil price decline and the Chinese firms' labour investment. Data of listed companies in China from 2012 to 2016 are used to explore this relationship. We show that the employment for firms in industries with significant negative oil price risk exposure increases 16.4% after the oil price plummeted, that is, the oil price decline significantly promotes the firms' labour force. Additionally, the positive effect of oil price decline on the firms' labour force is more pronounced in firms with higher risk‐taking, financing constraints, and industry competition. Lastly, we also document that the effect of oil price decline is through sales growth channels to increase labour demand. However, firms tend to overinvest in labour after the oil price plummeted. Based on these findings we suggest that oil price fluctuation should be an important factor for the Chinese government and enterprises when they make an economic decision related to the labour force.

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Section: Introductionmentioning

confidence: 84%

The oil price plummeted in 2014–2015: Is there an effect on Chinese firms' labour investment?

Liu

Shu-xian

et al. 2022

Int. J Fin Econ

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“…Over the past couple of decades, China has maintained and established itself as the fastest-growing emerging economies in the world, and China's economy has been dramatically influenced by the international oil price shocks (Allen et al, 2013;Peng et al, 2020;Hung, 2022b) since the reform and opening up, driving oil demand to increase quickly (Chen et al, 2021). China's crude oil imports have also increased to fulfill local demand, resulting in a very strong link with imports (Chen et al, 2020).…”

Section: Introductionmentioning

confidence: 99%

“…Several papers take into account the non-linearity in the nexus between global oil market and industrial output (Huang et al, 2005;Mehrara & Sarem, 2009;Sakashita & Yoshizaki, 2016;Yıldırım & Öztürk, 2014). In the Chinese context, the connections between the oil market and industrial output are examined (Chen et al, 2021;Cross & Nguyen, 2017;He, 2020;Tang et al, 2010), but the interplay between the global oil market and industrial output as well as the methods used is limitedly discussed (Raza et al, 2018).…”

Section: Introductionmentioning

confidence: 99%

“…Second, the existing literature has primarily utilised in-variant methodologies. Specifically, recent papers have started to conduct the study on the nexus between oil price variations and macroeconomic indicators from the time-varying perspective (Chen et al, 2020;Chen et al, 2021;Cross & Nguyen, 2017;He, 2020;Jo et al, 2019;Peng et al, 2020;Raza et al, 2018;Tang et al, 2010). These papers have employed either single-country data or multi-country panel data to examine the intercorrelation within the time-domain approach.…”

Section: Introductionmentioning

confidence: 99%

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Oil Prices and Economic Growth in China: A Time-Frequency Analysis

Thuy Tien Ho,

Nguyen Mau Ba Dang,

Ngo Thai Hung

2024

AAMJ

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This study analyses the inherent evolution dynamics of economic activity and global oil prices in China using the tools of wavelet and wavelet-based VAR-GARCH-BEKK model. Besides, the Wavelet-Granger causality test of Olayeni (2016) provides us further insights into the magnitude and direction of causal connectedness between oil prices and economic activity in China over time and across different frequencies simultaneously. We find that the spillover effects between China’s economic activity and global oil prices are time-varying in different time and frequencies in terms of direction and strength. More accurately, the prices and volatility spillovers between them are significant in the short and medium run but eventually neutral toward the long run. The Wavelet-Granger causality provides us further insights into the lead-lag relationships between oil prices and China’s economic activity from an economic perspective. The dynamic time-frequency association findings suggest crucial implications that might assist policymakers and other market participants in mitigating risk.

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“…As the most influential international currency and commodity asset globally, the USD and crude oil have pivotal roles in the world economy, and the volatility of both prices can substantially affect the global business cycle (Chen et al, 2021; Olstad et al, 2021; Salisu et al, 2022). Since oil transactions have long been denominated and settled primarily in the USD, a close relationship naturally exists between the USD exchange rate and oil prices, and thus understanding the characteristics of the dollar–oil relationship is significant for global producers, consumers, investors and policymakers (Beckmann et al, 2020).…”

Section: Introductionmentioning

confidence: 99%

The effect of the US dollar exchange rate on oil prices: An oil financialization perspective

Wang

Liu

et al. 2022

Int. J Fin Econ

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This study investigates the regime‐specific relationship between the USD exchange rate and oil prices. We embed the threshold variables of structural breaks and oil financialization into the VAR model of the dollar–oil relationship. Using daily data from 1983 to 2022, we find that a marked structural change in the dollar–oil relation exists in 2001 and that deepening oil financialization drives the structural change, making the portfolio effect the dominant effect of the dollar on oil prices. After 2001, the dollar negatively affects oil prices in both the long and short run. Furthermore, our threshold regression based on the investor self‐adaptive expectation model shows that investor expectations significantly affect the dollar–oil relationship under oil financialization. A sharp increase in USD exchange rate volatility would strengthen investors' unilateral expectation of the trend of the USD exchange rate, which further enhances the portfolio effect, resulting in an even stronger negative effect of the dollar on oil prices.

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Time‐varying effects and structural change of oil price shocks on industrial output: Evidence from China's oil industrial chain

Cited by 11 publications

References 56 publications

The oil price plummeted in 2014–2015: Is there an effect on Chinese firms' labour investment?

The oil price plummeted in 2014–2015: Is there an effect on Chinese firms' labour investment?

Oil Prices and Economic Growth in China: A Time-Frequency Analysis

The effect of the US dollar exchange rate on oil prices: An oil financialization perspective

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