PREPRINT: Granger Predictability of Oil prices after the Great Recession

Szilard Benk; Max Gillman

doi:10.1016/J.JIMONFIN.2019.102100

PREPRINT: Granger Predictability of Oil prices after the Great Recession

Szilard Benk, Max Gillman

University of Missouri-St. Louis

Research output: Contribution to journal › Article › peer-review

Abstract

Real oil prices surged from 2009 through 2014, comparable to the 1970s oil shock period. Standard explanations based on monopoly markup fall short since ination remained low after 2009. This paper contributes strong evidence of Granger (1969) predictability of nominal factors to oil prices, using one adjustment to monetary aggregates. This adjustment is the subtraction from the monetary aggregates of the 2008-2009 Federal Reserve borrowing of reserves from other Central Banks (Swaps), made after US reserves turned negative. This adjustment is key in that Granger predictability from standard monetary aggregates is found only with the Swaps subtracted.

Original language	American English
Journal	Journal of International Money and Finance
Volume	101
DOIs	https://doi.org/10.1016/J.JIMONFIN.2019.102100
State	Published - Mar 1 2020

Keywords

Oil price shocks
Granger predictability
Monetary base
M1 Divisia
Swaps
Inflation

Disciplines

Economics
Macroeconomics

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10.1016/J.JIMONFIN.2019.102100License: Unspecified

Cite this

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title = "PREPRINT: Granger Predictability of Oil prices after the Great Recession",

abstract = " Real oil prices surged from 2009 through 2014, comparable to the 1970s oil shock period. Standard explanations based on monopoly markup fall short since ination remained low after 2009. This paper contributes strong evidence of Granger (1969) predictability of nominal factors to oil prices, using one adjustment to monetary aggregates. This adjustment is the subtraction from the monetary aggregates of the 2008-2009 Federal Reserve borrowing of reserves from other Central Banks (Swaps), made after US reserves turned negative. This adjustment is key in that Granger predictability from standard monetary aggregates is found only with the Swaps subtracted. ",

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AB - Real oil prices surged from 2009 through 2014, comparable to the 1970s oil shock period. Standard explanations based on monopoly markup fall short since ination remained low after 2009. This paper contributes strong evidence of Granger (1969) predictability of nominal factors to oil prices, using one adjustment to monetary aggregates. This adjustment is the subtraction from the monetary aggregates of the 2008-2009 Federal Reserve borrowing of reserves from other Central Banks (Swaps), made after US reserves turned negative. This adjustment is key in that Granger predictability from standard monetary aggregates is found only with the Swaps subtracted.

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KW - Granger predictability

KW - Monetary base

KW - M1 Divisia

KW - Swaps

KW - Inflation

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VL - 101

JO - Journal of International Money and Finance

JF - Journal of International Money and Finance

ER -

PREPRINT: Granger Predictability of Oil prices after the Great Recession

Abstract

Keywords

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