The Economic Impacts of World Iron Ore Price Shock Using MCHUGE, A Dynamic CGE Model of China

The issue of world iron ore price fluctuation is receiving much attention from scholars and policy makers. Using a dynamic computable general equilibrium model, the paper evaluates the economic impacts of world iron ore price shock. The simulation results show that the uproar of world iron ore price shall reduce the employment rate in the short run while in the long run it will bring down the aggregate capital stock, thus restraining the sustainable and sound development of China´s economy. What´s more, coupled with the decline of domestic investment demand, China´s capital shall spill out and the change of net foreign liabilities in China is negative. Thirdly, with the annual growth rate of world iron ore price become lower than the corresponding period of last year, which alleviate the cost pressure in steel and relevant industries, making regarding products more cost-competitive. Finally, we present the future extension of our research in the end.