Long-Term Oil Price Forecasts: A New Perspective on Oil and the Macroeconomy

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Long-Term Oil Price Forecasts: A New Perspective on Oil and the Macroeconomy

Please use this identifier to cite or link to this item: http://hdl.handle.net/10355/10319

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Title: Long-Term Oil Price Forecasts: A New Perspective on Oil and the Macroeconomy
Author: Miller, J. Isaac; Ni, Shawn, 1962-
Keywords: oil price forecasts
consumer oil use
Date: 2010-10-13
Publisher: Department of Economics
Citation: Department of Economics, 2010
Series/Report no.: Working papers (Department of Economics);WP 10-12
Abstract: We examine how future real GDP growth relates to changes in the forecasted longterm average of discounted real oil prices and to changes in unanticipated fluctuations of real oil prices around the forecasts. Forecasts are conducted using a state-space oil market model, in which global real economic activity and real oil prices share a common stochastic trend. Changes in unanticipated fluctuations and changes in the forecasted longterm average of discounted real oil prices sum to real oil price changes. We find that these two components have distinctly different relationships with future real GDP growth. Positive and negative changes in the unanticipated fluctuations of real oil prices correlate with asymmetric responses of future real GDP growth. In comparison, changes in the forecasted long-term average are smaller in magnitude but are more influential on real GDP. Persistent upward revisions of forecasts in the 2000s had a substantial negative impact on real GDP growth, according to our estimates.
URI: http://hdl.handle.net/10355/10319

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  • Economics publications (MU) [120]
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