ACTUAL OR NUMERICAL? A DISCUSSION ON CRUDE OIL PRICES AND EXPORTS

Transcription

1 LOGO China University of Geosciences ACTUAL OR NUMERICAL? A DISCUSSION ON CRUDE OIL PRICES AND EXPORTS Reporter:Wenqi Zhu Educational Institution :CUG Singapore June 2017

2 CONTENT Introduction Literature Review Granger Causality Tests Dynamic Factor Model Results & Conclusions

3 Introduction Whether the shock of energy prices, will have an impact on China's trade structure?

4 Introduction Some scholars believe that this is due to China's labor surplus, but we find the same phenomenon occured in some oil trading countries and regions, such as Europe, the United States, Canada, Mexico, etc.

5 CONTENT Introduction Literature Review Granger Causality Tests Dynamic Factor Model Results & Conclusions

6 Literature Review When the price of oil has gone up, the world's total consumer demand will decline, which will reduce the rate of economic growth, and lead to economic recession. Fried & Schultze(1975), Dohner(1981) After World War II, almost every recession was related to oil prices except Hamilton(1983) The world oil prices rose 10%, China's GDP fell by about 0.1%, while commodity prices rose 0.1%. Wei(2002)

7 Literature Review Hillman & Bullard(1978) used input-output method to study the relationship between energy consumption and trade by the H-O model theory. Goldberg(1984) and Owen(1982) both thought that the scale and structure of energy consumption are important to import and export trade. Ricardo and André(2009) found a phenomenon that there was a positive correlation between Chinese exports and the oil price. Yang & Yue(2010) analysed why Chinese energy prices and exports changed in the same direction.

8 CONTENT Introduction Literature Review Granger Causality Tests Dynamic Factor Model Results & Conclusions

9 Granger Causality Tests Correlation test Table 1: The correlation coefficient between crude oil price and export trade CHN US JPN EU ME CA MEX correlation coefficient

10 Granger Causality Tests Granger causality test Original hypothesis 1: export volume is not the Granger cause of oil prices Lagging number CHN US JPN EU ME CA MEX Original hypothesis 2: oil prices are not the reasons for the export of Granger Lagging number Table 2: linear Granger causality test F statistics CHN US JPN EU ME CA MEX

11 Granger Causality Tests Granger causality test Original hypothesis 3: export volume is not the cause of nonlinear Granger of oil prices Lagging number CHN US JPN EU ME CA MEX *** 3.436*** 1.306* 2.481*** 3.631*** 3.905*** 3.247*** *** 3.105*** 1.712** 1.980** 3.315*** 3.482*** 3.040*** *** 2.947*** 1.963** 1.612* 2.982*** 3.174*** 2.692*** Original hypothesis 4: oil prices are not the reasons for the export of nonlinear Granger Lagging number Table 3: nonlinear causality test T n statistics CHN US JPN EU ME CA MEX ** 3.176*** ** 3.113*** 3.311*** 3.089*** *** 3.761*** *** 3.803*** 3.816*** 3.428*** *** 3.682*** 1.559* 2.389*** 3.848*** 3.803*** 3.689***

12 CONTENT Introduction History study of crude oil prices and exports Granger Causality Tests Dynamic Factor Model Results & Conclusions

13 Dynamic Factor Model Dynamic Factor Model Table 4: Regression results of Dynamic Factor Model DFM Oil-exporting countries Oil-importing countries(all) Constant Factor 1 Factor E-17 (.064).676*** (.065) (.065) (.058).671*** (.058) (.058) Oil-improting countries CHN (.129).597*** (.131) (.131) Developed country (.064).699*** (.064).067 (.064)

14 CONTENT Introduction History study of crude oil prices and exports Granger Causality Tests Dynamic Factor Model Results & Conclusions

15 Results & Conclusions There is a strong correlation between crude oil prices and the exports of major economies in the world and the Middle East is The correlation between crude oil prices and oil importing countries is related to the stage of economic development, developed countries are more closely related to oil prices. The export volume of all countries is not Grainger's reason for oil prices, and oil prices are not Grainger's reason for export volume. For the oil exporting countries the rising crude oil prices will lead to a decline in exports, the falling crude oil prices will rise the exports. For oil importing developed countries the rising crude oil prices will lead to a decline in exports too, but the falling oil prices will not lead to a significant rise in exports. In general, the fluctuation of crude oil price has a strong relationship with the export of oil exporting countries. However, the relationship between oil importing countries is relatively complicated. We guess the main reason for this phenomenon is that, for oil importing countries, fluctuations in oil prices have little impact on the country's production costs, and the changes in costs lags behind the crude oil prices.

16 LOGO IAEE JUNE 2017 SINGAPORE