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Macroeconomic Factors and Oil Futures Prices: A Data-Rich Model

I study the dynamics of oil futures prices in the NYMEX using a large panel dataset that includes global macroeconomic indicators, financial market indices, quantities and prices of energy products. I extract common factors from these series and estimate a Factor-Augmented Vector Autoregression for the maturity structure of oil futures prices. I find that latent factors generate information that, once combined with that of the yields, improves the forecasting performance for oil prices. Furthermore, I show that a factor correlated to purely financial developments contributes to the model performance, in addition to factors related to energy quantities and prices.

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Paper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number 2009:7.

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Length: 27 pages
Date of creation: 10 Feb 2009
Date of revision:
Handle: RePEc:hhs:sunrpe:2009_0007
Contact details of provider: Postal: Department of Economics, Stockholm, S-106 91 Stockholm, Sweden
Phone: +46 8 16 20 00
Fax: +46 8 16 14 25
Web page: http://www.ne.su.se/
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  17. Ben S. Bernanke, 2008. "Semiannual monetary policy report to the Congress: testimony before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, February 28, 2008," Speech 363, Board of Governors of the Federal Reserve System (U.S.).
  18. Mönch, Emanuel, 2005. "Forecasting the yield curve in a data-rich environment: a no-arbitrage factor-augmented VAR approach," Working Paper Series 0544, European Central Bank.
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