The Interaction Between Crude Oil And China 's Gdp

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Final thesis The Interaction between the Crude Oil Price and China’s GDP Pinpin Lyu B00648666 06/04/2015 Assignment 10 Prepare for Honours Thesis, Econ 4200 Style: Content: ____________________________ TOTAL: Abstract This paper analyzes the interaction between the crude oil price and real GDP per capita in China. I find that both the crude oil price and the real GDP per capita in China have overall rising trend from 1980 to 2014. I use granger causality test to study the causal relationship of the two variables. The results show that here is not a clear interaction…show more content…
At the same time, fluctuation of the crude oil price has put pressure on the price level and economic growth in China. In this research I ask: “What is the interaction between crude oil price and China’s economy?” A considerable amount of economic literature have analyzed the impact of oil price on the GDP in developed countries. Such as Jimenez and Sanchez (2004) have studied links between oil price and macro-economy in several industrial OECD countries. They found that oil price fluctuations have considerable effects on economic activities. We do not know the interaction between the crude oil price and economy in China. China is interesting in this content because it has large population which affects the demand for crude oil. Also, China’s GDP is growing rapidly, and the dependence on imported oil have increased in China, but only a few studies have focused on China. In Ghalayini’s study, by investigating the relationship between oil price and economic growth, the researcher found that as economic growth increases the demand for oil increases which pushes up the oil prices. While the increase in GDP growth and economic activity have led to an increase in the energy demand, a feedback relationship exists which can mitigate this effect (Ghalayini, 2011). In this research, I will use granger causality test and regression models to study interaction between the crude oil price and GDP in China. There are several alternative approaches,
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