Oil-Price Density Forecasts of U.S. GDP

Francesco Ravazzolo and Philip Rothman ()

No No 10/2015, Working Papers from Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School

Abstract: We carry out a pseudo out-of-sample density forecasting study for U.S. GDP with an autoregressive benchmark and alternatives to the benchmark than include both oil prices and stochastic volatility. The alternatives to the benchmark produce superior density forecasts. This comparative density performance appears to be driven more by stochastic volatility than by oil prices. We use our density forecasts to compute a recession risk indicator around the Great Recession. The alternative model that includes the real price of oil generates the earliest strong signal of a recession; but it also shows increased recession risk after the Great Recession.

Pages: 19 pages
Date: 2015-10
New Economics Papers: this item is included in nep-ene, nep-for and nep-mac
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Journal Article: Oil-price density forecasts of US GDP (2016)
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