The Unassuming Economist

From a paper by Li Xie, and Zhisheng Huang:

“We incorporate the characteristics of energy price management systems in developed countries and China into a dynamic stochastic general equilibrium model (DSGE) respectively, examine the differences in the impact of international energy price shocks on the countries’ inflation under the two types of energy price management systems, and then analyze the role of developed countries’ energy price management system (DC-EPMS) and China’s energy price management system (CN-EPMS) in the process of international energy price shocks affecting inflation. The results indicate that CN-EPMS is more effective in mitigating the negative impact of international energy price shocks on inflation compared to DC-EPMS in developed countries. Under the DC-EPMS, non-state-owned enterprises in a dominant position in the energy market, faced with international energy price shocks, will be driven by profit-maximizing behaviors to transfer the fluctuations in international energy prices to domestic energy prices and their expectations, thereby triggering inflation in developed countries; under the CN-EPMS, state-owned energy enterprises as policy implementation tools, faced with international energy price shocks, have played a functional role in safeguarding energy supply and maintaining energy price stability through energy price control and policy-oriented financial support, thereby stabilizing the energy price expectations of domestic energy consumers and effectively blocking the transmission of international energy price shocks to the inflation.”