How do energy prices affect economic environment under different price regulation policies?

Energy is an essential factor for the survival of industries. Energy can affect the industrial productivity related to the economic activities, and the fluctuation of energy price will influence the final energy consumption level. In this paper, we use the input-output price model to study the relationship between the fluctuation of energy price and the change of economic level under different price control scenarios. The results show that the energy price fluctuation has high conduction efficiency on the general price index in the non-price-regulated scenario. Comparing the simulation results obtained from different years, this paper found that the magnitude of price conduction effect is closely related to the proportion of energy consumption. When the energy price is regulated by the government, the conduction effect of the energy price is limited. The policy effectiveness of regulation is related to the extent of price volatility of energy sources located at the upstream of the production chain of the regulated object. Through the SVAR model, this paper also found that the conduction effect of energy price fluctuation has obvious hysteresis, and the lag period of conduction effect on PPI is longer than that on CPI.

Automated summary

This paper studies the impact of energy price fluctuations on economic levels, showing that energy price fluctuations have high conduction efficiency on general price indexes in non-price-regulated scenarios, but are limited in scenarios where energy prices are regulated by the government.