IMF Working Papers Volume 2019 Issue 237: Granger Predictability of Oil Prices After the Great Recession (2019)

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Granger Predictability of Oil Prices After the Great Recession

Author:

Szilard Benk

Szilard Benk
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Max Gillman

Max Gillmannull

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Series:: IMF Working Papers

Volume/Issue:: Volume 2019: Issue 237

Publication Date:: 01 Nov 2019

DOI:: https://doi.org/10.5089/9781513518626.001

ISBN:: 9781513518626

ISSN:: 1018-5941

Pages:: 18

Keywords:: WP; sub; M1 Divis-SWP; excess reserves; Q43; E510; E520; expectations Granger; inflation expectation; Granger predictability; predictability CPI inflation; inflation expectations Granger; long term inflation expectations Granger; WTI price; longer term inflation expectations Granger; EXPMICH inflation expectations variable; CPI Granger; Oil prices; Inflation; Gold prices; Monetary base; Consumer price indexes

Legal-disclaimer:: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Series:: IMF Working Papers

Volume/Issue:: Volume 2019: Issue 237

Language:: English

Publication Date:: 01 Nov 2019

DOI:: https://doi.org/10.5089/9781513518626.001

ISBN:: 9781513518626

ISSN:: 1018-5941

Pages:: 18

Keywords:: WP; sub; M1 Divis-SWP; excess reserves; Q43; E510; E520; expectations Granger; inflation expectation; Granger predictability; predictability CPI inflation; inflation expectations Granger; long term inflation expectations Granger; WTI price; longer term inflation expectations Granger; EXPMICH inflation expectations variable; CPI Granger; Oil prices; Inflation; Gold prices; Monetary base; Consumer price indexes

Legal-disclaimer:: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

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Real oil prices surged from 2009 through 2014, comparable to the 1970’s oil shock period. Standard explanations based on monopoly markup fall short since inflation 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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IMF Working Papers

ISSN:: 1018-5941

Publisher:: International Monetary Fund

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