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Oil-Price Density Forecasts of U.S. GDP

Listed author(s):
  • Francesco Ravazzolo

    ()

We carry out a pseudo out-of-sample density forecasting study for U.S. GDP with an autoregressive benchmark and alternatives to the benchmark than include both oil prices and stochastic volatility. The alternatives to the benchmark produce superior density forecasts. This comparative density performance appears to be driven more by stochastic volatility than by oil prices. We use our density forecasts to compute a recession risk indicator around the Great Recession. The alternative model that includes the real price of oil generates the earliest strong signal of a recession; but it also shows increased recession risk after the Great Recession.

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File URL: https://www.bi.edu/contentassets/8645e321cbe34b43b009d17a060d0f1d/working_camp_10-2015.pdf
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Paper provided by Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School in its series Working Papers with number No 10/2015.

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Length: 19 pages
Date of creation: Oct 2015
Handle: RePEc:bny:wpaper:0038
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  36. Omori, Yasuhiro & Chib, Siddhartha & Shephard, Neil & Nakajima, Jouchi, 2007. "Stochastic volatility with leverage: Fast and efficient likelihood inference," Journal of Econometrics, Elsevier, vol. 140(2), pages 425-449, October.
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