Transmission Mechanism of the International Energy Price Fluctuation: Empirical Research Based on VAR Model

Abstract

With the rapid growth of energy consumption and total imports in China, domestic and international energy markets affect each other more. Supply and demand and price changes in the international energy market impact on these in domestic increasingly significantly, while the latter has also become an important factor in the international energy market supply and demand and price changes. Under the new circumstances, the international energy market must be payed more attention to ensure the relative stability of the domestic energy market supply and demand and prices. In this paper, An empirical analysis on the effect of international oil price fluctuations on Chinese industrial output, imports and exports and the stock market is made by using impulse response function and variance decomposition method based on the Vector Auto Regression (VAR) Model .We suggest that fluctuations in international oil prices have a stock to Chinese import and export levels and stock markets to some degree ,as well as affect Chinese industrial outputs outstandingly, and thus this paper brings up some suggestions about how to deal with international oil price changes in China.