China has been in rapid economic growth and industrial structure reform for recent years, and oil, as a most important raw material for industrial production, its price fluctuations have direct impact on energy-intensive industries as well as non-energy-intensive industries and their associated industries’ overall demands. Under the price transmission mechanism, oil price volatility imposes significant influences on economic growth rate, price level, unemployment rate and monetary policy as well. This paper established VAR model among oil prices and economic indicators such as economic growth rate, price level, unemployment rate and monetary policy, and by data processing , stability test and cointegration test, we found that there existed long term stable cointegration relations among these sequences; through Granger Causality test we found that oil price volatility was the Granger cause of the fluctuations of economic growth rate, price level and monetary policy, and meanwhile, changes in economic growth rate is the Granger cause of that in price level. The result of our empirical study indicated that, oil price volatility has a profound influence on China’s economy, and thus, China should improve the establishment of the oil futures market to avoid risks of oil price volatility and secure long-term stability of its economic growth.
The Short and Long Run Dynamics of Monetary Policy, Oil Price Volatility and Economic Growth in the CEMAC Region