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Power supply, coal price, and economic growth in China

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Abstract

In this paper, we develop a coal–electricity vertical price transmission model for analyzing the relationships between power supply, coal price, and economic growth. We empirically test the model using data from 1996 to 2011. The results suggest that there is a long-run equilibrium relationship between power supply, coal price, and economic growth. Power shortages represent departures from this long-run equilibrium relationship. Applying a bootstrapped Granger causality test, we find unidirectional Granger causality from power supply to economic growth and from coal price to power supply, and bidirectional Granger causality between coal price and economic growth. We also discuss policy implications suggested by these results, including monitoring coal price fluctuations, perfecting the coal–electricity price linking system, and breaking the administrative monopoly in China’s electricity market.

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Notes

  1. The power supply is equal to power consumption because power cannot be stored. In order to facilitate the theoretical analysis, we prefer to refer to the power supply.

  2. FOB means “freight on board”; it includes coal price plus the price of the services for loading coal onto the ship.

  3. When the power market is a perfect monopoly, \(\textit{HHI}=1\) ; as the power market tends towards perfect competition, \(\textit{HHI}\rightarrow 0\) In order to avoid negative prices, assume that \(e>\eta +(1-\eta )\textit{HHI}\).

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Acknowledgments

We are thankful for the support of the National Social Science Foundation of China (11BFX056), Zhejiang Key Research Institute of the Humanities and Social Sciences: Center for Research of Regulation & Policy (No. 12JDGZ01Z), Zhejiang Natural Science Foundation (No. Y12G030080), Special Program for Key Research Institute of Humanities and Social Sciences of Liaoning Department of Education (Nos. ZJ2013044 and ZJ2013034), Dongbei University of Finance and Economics Outstanding Scientific and Innovative Talents Project (No. DUFE2015R02), Dongbei University of Finance and Economics Youth Training Program (No. DUFE2014Q18), and 2014 Industrial Economics Featured Key Disciplines Scientific Research Project at Dongbei University of Finance and Economics.

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Authors and Affiliations

  1. School of Statistics and Applied Mathematics, Anhui University of Finance and Economics, Bengbu, 233030, China

    Ma-lin Song

  2. Shanghai National Accounting Institute, Shanghai, 201702, China

    Hang Song

  3. Research Academy of Economic and Social Development, Dongbei University of Finance and Economics, Dalian, 116025, China

    Jia-jia Zhao

  4. Center for Industrial and Business Organization, Dongbei University of Finance and Economics, Dalian, 116025, China

    Jian-lin Wang

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  1. Ma-lin Song
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Correspondence to Jian-lin Wang.

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Song, Ml., Song, H., Zhao, Jj. et al. Power supply, coal price, and economic growth in China. Energy Syst 8, 727–746 (2017). https://doi.org/10.1007/s12667-015-0167-3

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