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Do oil prices predict economic growth? New global evidence

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  • Narayan, Paresh Kumar
  • Sharma, Susan
  • Poon, Wai Ching
  • Westerlund, Joakim

Abstract

In this paper, we test whether oil price predicts economic growth for 28 developed and 17 developing countries. We use predictability tests that account for the key features of the data, namely, persistency, endogeneity, and heteroskedasticity. Our analysis considers a large number of countries, shows evidence of more out-of-sample predictability with nominal than real oil prices, finds in-sample predictability to be independent of the use of nominal and real prices, and reveals greater evidence of predictability for developed countries.

Suggested Citation

  • Narayan, Paresh Kumar & Sharma, Susan & Poon, Wai Ching & Westerlund, Joakim, 2014. "Do oil prices predict economic growth? New global evidence," Energy Economics, Elsevier, vol. 41(C), pages 137-146.
    • Handle: RePEc:eee:eneeco:v:41:y:2014:i:c:p:137-146
    DOI: 10.1016/j.eneco.2013.11.003
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    More about this item

    Keywords

    Economic growth; Predictability; Oil price;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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