Long-Term Oil Price Forecasts: A New Perspective on Oil and the Macroeconomy
We examine how future real GDP growth relates to changes in the forecasted long-term average of discounted real oil prices and to changes in unanticipated fluctuationsof real oil prices around the forecasts. Forecasts are conducted using a state-space oil market model, in which global real economic activity and real oil prices share a commonstochastic trend. Changes in unanticipated fluctuations and changes in the forecasted long-term average of discounted real oil prices sum to real oil price changes. We find thatthese two components have distinctly different relationships with future real GDP growth. Positive and negative changes in the unanticipated fluctuations of real oil prices correlatewith asymmetric responses of future real GDP growth. In comparison, changes in the forecasted long-term average are smaller in magnitude but are more influential on real GDP.Persistent upward revisions of forecasts in the 2000s had a substantial negative impact on real GDP growth, according to our estimates.. Classification-JEL: E31, E32, Q43
|Date of creation:||11 Oct 2010|
|Publication status:||Published in Macroeconomic Dynamics 2011 (revised version)|
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