TITLE:
The Mechanism of Imported Iron Ore Price in China
AUTHORS:
Zhijie Fu
KEYWORDS:
Iron Ore Price, ARIMA, Cointegration, IRF, VECM
JOURNAL NAME:
Modern Economy,
Vol.9 No.11,
November
22,
2018
ABSTRACT: This study analyzes the
relationship and the issues between iron ore market from demand and supply side. It empirically explains how and why the
import iron ore price in China fluctuates through Baltic Dry Index,
Dollar Index, iron ore production, volume of
import iron ore, and also compares the forecast ability between Vector
Error Corrected Model (VECM) and ARIMA model. This paper concludes the
following finds. Firstly, there is no structural break and seasonality. The
data are first degree stationary and have 1 cointegration relationship between
variables. In addition, the impulse response function shows that the import iron ore price is positively sensitive to BDI and
negatively sensitive to Dollar Index, and it reveals the fact that China has
less power to influence the iron ore price even if it has been the largest
buyer. Finally, forecast ability assessment shows that VECM outperforms
ARIMA model.