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The Long-Run Forecasting of Energy Prices Using the Model of Shifting Trend

  • Stanislav Radchenko

    (UNC at Charlotte)

This paper constructs long-term forecasts of energy prices using a reduced form model of shifting trend developed by Pindyck (1999). A Gibbs sampling algorithm is developed to estimate models with a shifting trend line which are used to construct 10-period-ahead and 15-period ahead forecasts. An advantage of forecasts from this model is that they are not very influenced by the presence of large, long-lived increases and decreases in energy prices. The forecasts form shifting trends model are combined with forecasts from the random walk model and the autoregressive model to substantially decrease the mean forecast squared error compared to each individual model.

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File URL: http://econwpa.repec.org/eps/em/papers/0502/0502002.pdf
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Paper provided by EconWPA in its series Econometrics with number 0502002.

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Length: 29 pages
Date of creation: 04 Feb 2005
Date of revision:
Handle: RePEc:wpa:wuwpem:0502002
Note: Type of Document - pdf; pages: 29
Contact details of provider: Web page: http://econwpa.repec.org

References listed on IDEAS
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  1. Marwan Chacra, 2002. "Oil-Price Shocks and Retail Energy Prices in Canada," Working Papers 02-38, Bank of Canada.
  2. Paul Cashin & C. John McCDermott, 2002. "The Long-Run Behavior of Commodity Prices: Small Trends and Big Variability," IMF Staff Papers, Palgrave Macmillan, vol. 49(2), pages 2.
  3. Jean-Thomas Bernard & Lynda Khalaf & Maral Kichian, 2004. "Structural Change and Forecasting Long-Run Energy Prices," Working Papers 04-5, Bank of Canada.
  4. Dees, Stephane & Karadeloglou, Pavlos & Kaufmann, Robert K. & Sanchez, Marcelo, 2007. "Modelling the world oil market: Assessment of a quarterly econometric model," Energy Policy, Elsevier, vol. 35(1), pages 178-191, January.
  5. Lin Chan, Hing & Kam Lee, Shu, 1997. "Modelling and forecasting the demand for coal in China," Energy Economics, Elsevier, vol. 19(3), pages 271-287, July.
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