Oil price assumptions for macroeconomic policy

Stavros Degiannakis and George Filis

MPRA Paper from University Library of Munich, Germany

Abstract: Despite the arguments that are put forward by the literature that oil price forecasts are economically useful, such claim has not been tested to date. In this study we evaluate the economic usefulness of oil price forecasts by means of conditional forecasting of three core macroeconomic indicators that policy makers are predicting, using assumptions about the future path of the oil prices. The chosen indicators are the core inflation rate, industrial production and purchasing price index. We further consider two more indicators, namely inflation expectation and monetary policy uncertainty. To do so, we initially forecast oil prices using a MIDAS framework and subsequently we use regression-based models for our conditional forecasts. Overall, there is diminishing importance of oil price forecasts for macroeconomic projections and policy formulation. An array of arguments is presented as to why this might be the case, which relate to the improved energy efficiency, the contemporary monetary policy tools and the financialisation of the oil market. Our findings remain robust to alternative oil price forecasting frameworks.

Keywords: Conditional forecasting; oil price forecasts; MIDAS; core inflation; inflation expectations (search for similar items in EconPapers)
JEL-codes: C53 E27 E37 Q47 (search for similar items in EconPapers)
Date: 2020-05-27
New Economics Papers: this item is included in nep-ene, nep-for, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/100705/1/MPRA_paper_100705.pdf original version (application/pdf)

Related works:
Journal Article: Oil price assumptions for macroeconomic policy (2023)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:100705

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().