Effects of Government Regulation of Diesel and Petrol Prices on GDP Growth: Evidence From China

This paper presents estimates of the effects that government regulation of diesel and petrol prices has on GDP growth. We specify VAR models with asymmetric effects of positive and negative changes in the regulatory prices. We estimate the VAR models on quarterly data from China's national accounts statistics during the period Q1 1998 to Q4 2018. Our main findings are that: (i) negative growth rates of regulatory diesel and petrol prices significantly reduce GDP growth; (ii) positive growth rates of regulatory diesel and petrol prices have small positive effects on GDP growth which are not significantly different from zero.