Credit, the Stock Market and Oil: Forecasting Us GDP

52 Pages Posted: 11 Sep 2001

See all articles by John Muellbauer

John Muellbauer

University of Oxford - Department of Economics; Centre for Economic Policy Research (CEPR)

L. Nunziata

University of Padua - Department of Economics; IZA Institute of Labor Economics

Date Written: August 2001

Abstract

We derive a comprehensive one-year ahead forecasting model of US per capita GDP for 1955-2000, examining collectively variables usually considered singly, e.g. interest rates, credit conditions, the stock market, oil prices and the yield gap, of which all, except the last, are found to matter. The credit conditions index is measured in the Federal Reserve's Survey of Senior Loan Officers and its importance is consistent with a 'financial accelerator' view. The balance of payments, exchange rate and fiscal policy also play a role. We address the Lucas critique, investigating consequences of monetary policy regime shifts in 1980, and fiscal policy regime shifts at the end of the 1980s. The model forecasts the most severe growth reversal in 2001 since 1974.

Keywords: Lucas critique, macroeconomic forecasts, monetary policy transmission, oil prices, the credit channel, the financial accelerator, US recession

JEL Classification: E32, E37, E63

Suggested Citation

Muellbauer, John and Nunziata, Luca, Credit, the Stock Market and Oil: Forecasting Us GDP (August 2001). CEPR Discussion Paper No. 2906. Available at SSRN: https://ssrn.com/abstract=283110

John Muellbauer (Contact Author)

University of Oxford - Department of Economics ( email )

Manor Road Building
Manor Road
Oxford, OX1 3BJ
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+44 1865 278 583 (Phone)
+44 1865 278 557 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Luca Nunziata

University of Padua - Department of Economics ( email )

via Del Santo 33
Padova, 35123
Italy

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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