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Asymmetric pass through of oil price to Chinese economic growth: new evidence from industrial sectors

Donghui Liu (School of Economics and Management, Nanjing University of Science and Technology, Nanjing, China)
Lingjie Meng (School of Economics and Management, Nanjing University of Science and Technology, Nanjing, China)
Yudong Wang (School of Economics and Management, Nanjing University of Science and Technology, Nanjing, China)

Kybernetes

ISSN: 0368-492X

Article publication date: 30 August 2021

Issue publication date: 30 November 2022

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Abstract

Purpose

Oil is crucial for industrial development. This paper investigates the impacts of oil price changes on China's industrial growth and examines whether the impacts are asymmetric. The estimations can help determine how oil price shocks are transmitted throughout the economy.

Design/methodology/approach

This paper adopts West Texas Intermediate (WTI) crude oil price and industrial sector output and uses monthly data. The recently developed nonlinear autoregressive distributed lag (NARDL) model is employed to illustrate the effects in both the short term and long term. Importantly, under NARDL framework, this paper examines whether the impacts are asymmetric by decomposing oil price shocks into their positive and negative partial sums.

Findings

The empirical results prove clear evidence of asymmetries in the short term, long term or both terms. Specifically, some sectors benefit from, rather than suffer from higher oil prices, even some energy-intensive sectors, i.e. C31 (Smelting and Pressing of Ferrous Metals) and C32 (Smelting and Pressing of Non-ferrous Metals). However, the effects on some other energy-intensive sectors appear insignificant. Additionally, the results prove significantly negative responses in some sectors in the long term, and most of these sectors are in the top half of the ranking by energy consumptions.

Originality/value

This paper studies the economic responses at a disaggregated level by employing industry-level data. NARDL method is used to decompose oil price changes into their increases and decreases and investigate the asymmetries in the impacts of oil price changes.

Keywords

Citation

Liu, D., Meng, L. and Wang, Y. (2022), "Asymmetric pass through of oil price to Chinese economic growth: new evidence from industrial sectors", Kybernetes, Vol. 51 No. 12, pp. 3610-3636. https://doi.org/10.1108/K-03-2021-0187

Publisher

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Emerald Publishing Limited

Copyright © 2021, Emerald Publishing Limited

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