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Granger Predictability of Oil prices after the Great Recession

Szilard Benk () and Max Gillman ()

No 1016, Working Papers from University of Missouri-St. Louis, Department of Economics

Abstract: Real oil prices surged from 2009 through 2014, comparable to the 1970s oil shock period. Standard explanations based on monopoly markup fall short since ination 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: Oil Price Shocks; Granger Predictability; Monetary Base; M1 Divisia; Swaps; Ination. (search for similar items in EconPapers)
JEL-codes: Q43 E51 E52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene, nep-mac and nep-mon
Date: 2019-03
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