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Forecasting the oil price using house prices Mechanism and the Business Cycle

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  • Rainer Schulz
  • Martin Wersing

Abstract

We show that house prices from Aberdeen in the UK improve in- and out-of-sample oil price forecasts. The improvements are of a similar magnitude to those attained using macroeconomic indicators. We ex- plain these forecast improvements with the dominant role of the oil industry in Aberdeen. House prices aggregate the dispersed knowl- edge of the future oil price that exists in the city. We obtain similar empirical evidence for Houston, another city dominated by the oil in- dustry. Consistent with our explanation, we nd that house prices from economically more diversi ed areas in the UK and the US do not improve oil price forecasts.

Suggested Citation

  • Rainer Schulz & Martin Wersing, 2015. "Forecasting the oil price using house prices Mechanism and the Business Cycle," SFB 649 Discussion Papers SFB649DP2015-041, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  • Handle: RePEc:hum:wpaper:sfb649dp2015-041
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    References listed on IDEAS

    as
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    5. Leslie Rosenthal, 2006. "Efficiency and Seasonality in the UK Housing Market, 1991–2001," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 68(3), pages 289-317, June.
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    More about this item

    Keywords

    oil price forecasting; house prices; knowledge spillover;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • Q47 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy Forecasting
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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