Stochastic level shifts and outliers and the dynamics of oil price movements
AbstractOil prices clearly play an important role in the macroeconomy. The dynamics of oil prices have, however, been difficult to pin down because of the frequent occurrence of large shocks. In this paper, we propose a time series model with heavy-tailed disturbances to analyze the dynamics of the oil price. The model has the form of a generalized local linear trend, and we show that it successfully captures outliers and level shifts as empirical regularities in the oil price, including known historical price shocks. Further, the results of a forecast exercise are given, and we study extensions that examine the effect of the GDP cycle on the oil price.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal International Journal of Forecasting.
Volume (Year): 26 (2010)
Issue (Month): 1 (January)
Contact details of provider:
Web page: http://www.elsevier.com/locate/ijforecast
Band-pass filter Cycle Non-Gaussian Robust signal extraction Trend estimation Unobserved components;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Leduc, Sylvain & Sill, Keith, 2004.
"A quantitative analysis of oil-price shocks, systematic monetary policy, and economic downturns,"
Journal of Monetary Economics,
Elsevier, vol. 51(4), pages 781-808, May.
- Sylvain Leduc & Keith Sill, 2001. "A quantitative analysis of oil-price shocks, systematic monetary policy, and economic downturns," Working Papers 01-9, Federal Reserve Bank of Philadelphia.
- Robert Barsky & Lutz Kilian, 2004.
"Oil and the Macroeconomy Since the 1970s,"
NBER Working Papers
10855, National Bureau of Economic Research, Inc.
- Durbin, James & Koopman, Siem Jan, 2001.
"Time Series Analysis by State Space Methods,"
Oxford University Press, number 9780198523543.
- Tom Doan, . "SEASONALDLM: RATS procedure to create the matrices for the seasonal component of a DLM," Statistical Software Components RTS00251, Boston College Department of Economics.
- Hamilton, James D., 2003.
"What is an oil shock?,"
Journal of Econometrics,
Elsevier, vol. 113(2), pages 363-398, April.
- Jushan Bai, 1995.
"Estimating Multiple Breaks One at a Time,"
95-18, Massachusetts Institute of Technology (MIT), Department of Economics.
- Neil Shephard & Jurgen Doornik & Siem Jan Koopman, 1998.
"Statistical algorithms for models in state space using SsfPack 2.2,"
Economics Series Working Papers
1998-W06, University of Oxford, Department of Economics.
- Siem Jan Koopman & Neil Shephard & Jurgen A. Doornik, 1999. "Statistical algorithms for models in state space using SsfPack 2.2," Econometrics Journal, Royal Economic Society, vol. 2(1), pages 107-160.
- Koopman, S.J.M. & Shephard, N. & Doornik, J.A., 1998. "Statistical Algorithms for Models in State Space Using SsfPack 2.2," Discussion Paper 1998-141, Tilburg University, Center for Economic Research.
- Harvey, A.C. & Trimbur, T.M. & van Dijk, H.K., 2005.
"Trends and cycles in economic time series: A Bayesian approach,"
Econometric Institute Research Papers
EI 2005-27, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
- Harvey, Andrew C. & Trimbur, Thomas M. & Van Dijk, Herman K., 2007. "Trends and cycles in economic time series: A Bayesian approach," Journal of Econometrics, Elsevier, vol. 140(2), pages 618-649, October.
- Thomas M. Trimbur, 2006. "Properties of higher order stochastic cycles," Journal of Time Series Analysis, Wiley Blackwell, vol. 27(1), pages 1-17, 01.
- Raymond, Jennie E & Rich, Robert W, 1997. "Oil and the Macroeconomy: A Markov State-Switching Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(2), pages 193-213, May.
- Andrew C. Harvey & Thomas M. Trimbur, 2003.
"General Model-Based Filters for Extracting Cycles and Trends in Economic Time Series,"
The Review of Economics and Statistics,
MIT Press, vol. 85(2), pages 244-255, May.
- Harvey, A.C. & Trimbur, T.M., 2001. "General Model-based Filters for Extracting Cycles and Trends in Economic Time Series," Cambridge Working Papers in Economics 0113, Faculty of Economics, University of Cambridge.
- Tucker S. McElroy & Thomas M. Trimbur, 2012. "Signal extraction for nonstationary multivariate time series with illustrations for trend inflation," Finance and Economics Discussion Series 2012-45, Board of Governors of the Federal Reserve System (U.S.).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.