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The Long-Run Forecasting of Energy Prices Using the Model of Shifting Trend

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Author Info

  • Stanislav Radchenko

    (UNC at Charlotte)

Abstract

This paper constructs long-term forecasts of energy prices using a reduced form model of shifting trend developed by Pindyck (1999). A Gibbs sampling algorithm is developed to estimate models with a shifting trend line which are used to construct 10-period-ahead and 15-period ahead forecasts. An advantage of forecasts from this model is that they are not very influenced by the presence of large, long-lived increases and decreases in energy prices. The forecasts form shifting trends model are combined with forecasts from the random walk model and the autoregressive model to substantially decrease the mean forecast squared error compared to each individual model.

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File URL: http://128.118.178.162/eps/em/papers/0502/0502002.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Econometrics with number 0502002.

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Length: 29 pages
Date of creation: 04 Feb 2005
Date of revision:
Handle: RePEc:wpa:wuwpem:0502002

Note: Type of Document - pdf; pages: 29
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Web page: http://128.118.178.162

Related research

Keywords: energy forecasting; oil price; coal price; natural gas price; shifting trends model; long term forecasting;

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References

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  1. Paul Cashin & C. John McCDermott, 2002. "The Long-Run Behavior of Commodity Prices: Small Trends and Big Variability," IMF Staff Papers, Palgrave Macmillan, vol. 49(2), pages 2.
  2. Paul Cashin & C. John McDermott, 2001. "The Long-Run Behavior of Commodity Prices," IMF Working Papers 01/68, International Monetary Fund.
  3. Dees, Stephane & Karadeloglou, Pavlos & Kaufmann, Robert K. & Sanchez, Marcelo, 2007. "Modelling the world oil market: Assessment of a quarterly econometric model," Energy Policy, Elsevier, vol. 35(1), pages 178-191, January.
  4. Marwan Chacra, 2002. "Oil-Price Shocks and Retail Energy Prices in Canada," Working Papers 02-38, Bank of Canada.
  5. Lin Chan, Hing & Kam Lee, Shu, 1997. "Modelling and forecasting the demand for coal in China," Energy Economics, Elsevier, vol. 19(3), pages 271-287, July.
  6. Jean-Thomas Bernard & Lynda Khalaf & Maral Kichian, 2004. "Structural Change and Forecasting Long-Run Energy Prices," Working Papers 04-5, Bank of Canada.
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Cited by:
  1. Maslyuk, Svetlana & Smyth, Russell, 2008. "Unit root properties of crude oil spot and futures prices," Energy Policy, Elsevier, vol. 36(7), pages 2591-2600, July.
  2. Matteo Manera & Chiara Longo & Anil Markandya & Elisa Scarpa, 2007. "Evaluating the Empirical Performance of Alternative Econometric Models for Oil Price Forecasting," Working Papers 2007.4, Fondazione Eni Enrico Mattei.
  3. Giliola Frey & Matteo Manera & Anil Markandya & Elisa Scarpa, 2009. "Econometric Models for Oil Price Forecasting: A Critical Survey," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 10(1), pages 29-44, 04.

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