Granger Predictability of Oil Prices After the Great Recession

Szilard Benk and Max Gillman

No 2019/237, IMF Working Papers from International Monetary Fund

Abstract: 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.

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 (search for similar items in EconPapers)
Pages: 18
Date: 2019-11-01
New Economics Papers: this item is included in nep-ene and nep-mon
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Related works:
Journal Article: Granger predictability of oil prices after the Great Recession (2020)
Working Paper: Granger Predictability of Oil Prices after the Great Recession (2019)
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