Template-Type: ReDIF-Article 1.0 Author-Name: Shouyang Wang, Xun Zhang, and Lin Zhao Title: Why the Effects of Oil Price Shocks on Chinas Economy are Changing Classification-JEL: F0 Pages: 107-132 Volume: Volume 41 Issue: Number 6 Year: 2020 Abstract: Some studies on developed economies have revealed that the impacts of oil price shocks have decreased while conclusions about China remain occluded. We investigate the changing effects of oil price shocks on China's macroeconomy and discuss the causes. A time-varying parameter vector autoregressive (VAR) model reveals that impacts of oil price shocks on Chinaŭs economy have shown a downward trend since 1997. The responses of the real output are much greater and last longer than those of inflation. Then a new Keynesian dynamic stochastic general equilibrium model is developed to synthetically explore the causes. The results indicate that decreasing oil intensity and monopoly power reduce the effects of oil price shocks, while increasing capital intensity in production amplifies them. Other factors-such as changing price stickiness, deregulation of refined oil prices, and shifts in monetary policy targets-have limited effects on the relationship between oil price shocks and China's macroeconomy. Handle: RePEc:aen:journl:ej41-6-Zhang File-URL: http://www.iaee.org/en/publications/ejarticle.aspx?id=3580 File-Format: text/html File-Restriction: Access to full text is restricted to IAEE members and subscribers.