The Impact of Disaggregated Oil Shocks on State-Level Consumption of the United States
Rangan Gupta (),
Xin Sheng (),
Renee van Eyden () and
Mark Wohar ()
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Xin Sheng: Lord Ashcroft International Business School, Anglia Ruskin University, Chelmsford, CM1 1SQ, UK
No 202045, Working Papers from University of Pretoria, Department of Economics
This paper examines the predictive power of oil supply, demand and risk shocks over the realized volatility of intraday oil returns. Utilizing the heterogeneous autoregressive realized volatility (HAR-RV) framework, we show that all shock terms on their own, and particularly financial market driven risk shocks, significantly improve the forecasting performance of the benchmark HAR-RV model, both in- and out-of-sample. Incorporating all three shocks simultaneously in the HAR-RV model yields the largest forecasting gains compared to all other variants of the HAR-RV model, consistently at short-, medium-, and long forecasting horizons. The findings highlight the predictive information captured by disentangled oil price shocks in accurately forecasting oil market volatility, offering a valuable opening for investors and corporations to monitor oil market volatility using information on traded assets at high frequency.
Keywords: Oil shocks; state-level consumption; oil dependency; local projection model; impulse response functions (search for similar items in EconPapers)
JEL-codes: C23 E21 Q41 (search for similar items in EconPapers)
Pages: 8 pages
New Economics Papers: this item is included in nep-ene, nep-mac and nep-ore
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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:202045
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