Oil Price Forecastability and Economic Uncertainty

12 Pages Posted: 6 Apr 2015

See all articles by Stelios Bekiros

Stelios Bekiros

European University Institute - Economics Department (ECO); IPAG Business School; Athens University of Economics and Business; University of Bologna - Rimini Center for Economic Analysis (RCEA)

Rangan Gupta

University of Pretoria - Department of Economics

Alessia Paccagnini

University College Dublin (UCD) - Michael Smurfit Graduate School of Business; Australian National University (ANU) - Crawford School of Public Policy

Date Written: April 4, 2015

Abstract

Information on economic policy uncertainty (EPU) does matter in predicting oil returns especially when accounting for omitted nonlinearities in the relationship between these two variables via a time-varying coefficient approach. In this work, we compare the forecastability of standard, Bayesian and TVP-VAR models against the random-walk and benchmark AR models. Our results indicate that over the period 1900:1-2014:2 the time-varying VAR model with stochastic volatility outranks all alternative models.

Keywords: Oil prices, economic policy uncertainty, forecasting

JEL Classification: C22, C32, C53, E60, Q41

Suggested Citation

Bekiros, Stelios and Gupta, Rangan and Paccagnini, Alessia, Oil Price Forecastability and Economic Uncertainty (April 4, 2015). University of Milan Bicocca Department of Economics, Management and Statistics Working Paper No. 298, Available at SSRN: https://ssrn.com/abstract=2589853 or http://dx.doi.org/10.2139/ssrn.2589853

Stelios Bekiros

European University Institute - Economics Department (ECO) ( email )

Villa San Paolo
Via della Piazzuola 43
50133 Florence
Italy

IPAG Business School ( email )

184 BD Saint Germain
Paris, 75006
France

Athens University of Economics and Business ( email )

76 Patission Street
Athens, 104 34
Greece

University of Bologna - Rimini Center for Economic Analysis (RCEA) ( email )

Via Patara, 3
Rimini (RN), RN 47900
Italy

Rangan Gupta

University of Pretoria - Department of Economics ( email )

Lynnwood Road
Hillcrest
Pretoria, 0002
South Africa

Alessia Paccagnini (Contact Author)

University College Dublin (UCD) - Michael Smurfit Graduate School of Business ( email )

Blackrock, Co. Dublin
Ireland

Australian National University (ANU) - Crawford School of Public Policy ( email )

ANU College of Asia and the Pacific
J.G. Crawford Building, #132, Lennox Crossing
Canberra, Australian Capital Territory 0200
Australia

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