Granger Predictability of Oil Prices After the Great Recession

Author/Editor:

Szilard Benk ; Max Gillman

Publication Date:

November 1, 2019

Electronic Access:

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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.

Summary:

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.

Series:

Working Paper No. 19/237

Subject:

English

Publication Date:

November 1, 2019

ISBN/ISSN:

9781513518626/1018-5941

Stock No:

WPIEA2019237

Format:

Paper

Pages:

18

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