Industrial transmission effect of international metal price shocks in perspective of industry chain

Based on a new perspective of industry chain and selecting monthly data from February 2006 to December 2015, this paper chooses eight Chinese industrial sectors to construct a SVAR model reflecting internal relationships among metal chains, analyzes the direct effects and indirect effects of international metal prices on output of various links in metal chains, then it investigates the main transmission path of international metal price shocks through decomposing the inflation pressure sources in metal chains. The results show that international metal price shocks not only affect industrial output in a direct way, but also indirectly affect the growth of output through the increased pressure on industrial inflation and then triggering a tightening of monetary policy implementation. Affected by factors such as the lack of market demand and the price transmission mechanism blocking, the direct effects of international metal price shocks mainly impact the upstream and midstream industry, while the downstream industry is mainly affected by indirect effects; in addition, the international metal price shocks have spillover effects on the industrial inflation, and transmit along the industry chain from upstream to downstream, and their strength weakens in sequence.