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Credit, the Stock Market and Oil: Forecasting US GDP

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  • Muellbauer, John
  • Nunziata, Luca

Abstract

We derive a comprehensive one-year ahead forecasting model of US per capita GDP for 1955-2000, collectively examining variables usually considered singly, e.g. interest rates, credit conditions, the stock market, oil prices and the yield gap, of which all, except the last, are found to matter. The credit conditions index is measured in the Federal Reserve’s Survey of Senior Loan Officers and its importance is consistent with a ‘financial accelerator’ view. The balance of payments, exchange rate and fiscal policy also play a role. We address the Lucas critique, investigating consequences of monetary policy regime shifts in 1980, and fiscal policy regime shifts at the end of the 1980’s. The model forecasts in 2001 the most severe growth reversal since 1974.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2906.

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Date of creation: Aug 2001
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Handle: RePEc:cpr:ceprdp:2906

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Related research

Keywords: Lucas critique; macroeconomic forecasts; monetary policy transmission; oil prices; the credit channel; the financial accelerator; the US recession;

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References

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Citations

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Cited by:
  1. Jonathan Temple, 2002. "An Assessment of the New Economy," Bristol Economics Discussion Papers 02/542, Department of Economics, University of Bristol, UK.
  2. Narayan, Paresh Kumar & Narayan, Seema & Smyth, Russell, 2008. "Are oil shocks permanent or temporary? Panel data evidence from crude oil and NGL production in 60 countries," Energy Economics, Elsevier, vol. 30(3), pages 919-936, May.
  3. Christopher Bowdler, 2004. "Openness and the output-inflation tradeoff," Money Macro and Finance (MMF) Research Group Conference 2003 7, Money Macro and Finance Research Group.
  4. Svetlana Maslyuk & Russell Smyth, 2007. "Non-Linear Unit Root Properties of Crude Oil Production," Development Research Unit Working Paper Series 39-07, Monash University, Department of Economics.

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