Abstract: Using VAR model, this paper constructs a dynamic relationship system among crude oil prices, economic growth, price level, monetary policy and unemployment rate, focusing on the impact lau of oil price fluctuation on some of China's key economic variables, especially economic growth.Granger causality analysis shows that oil price volatility is the Granger reason which changes economic growth, price level and monetary policy.According to the VAR(2) model and impulse response analysis, oil prices increasing has some impact on China's economy: not to reduce the gross domestic product, but to make economic growth slow; to raise the price level by stimulating aggregate demand and cost increases; increase unemployment rate in long-term period; and to increase the difficulty of implementing monetary policy effectively.Overall, even though international oil prices and economic variables are complex and changeable, the economic system consisting of the international oil prices, economic growth, price level, money supply and unemployment rate is stable.That is to say, China's economy can develop smoothly and orderly through the automatic adjustment of the market economy and the macro-economic control of the government.

Key words: oil price volatility, economic growth rate, monetary policy, VAR, impulse response