Granger Predictability of Oil Prices after the Great Recession

19 Pages Posted: 3 Dec 2019

See all articles by Szilard Benk

Szilard Benk

European Central Bank (ECB)

Max Gillman

University of Missouri at Saint Louis; Central European University (CEU)

Date Written: November 2019


Real oil prices surged from 2009 through 2014, comparable to the 1970's oil shock period. Standard explanations based on monopoly markup fall short since inflation remained low after 2009. This paper contributes strong evidence of Granger (1969) predictability of nominal factors to oil prices, using one adjustment to monetary aggregates. This adjustment is the subtraction from the monetary aggregates of the 2008-2009 Federal Reserve borrowing of reserves from other Central Banks (Swaps), made after US reserves turned negative. This adjustment is key in that Granger predictability from standard monetary aggregates is found only with the Swaps subtracted.

Keywords: Supply and demand, Oil prices, Real interest rates, Energy prices, Gold prices, Oil Price Shocks, Granger Predictability, Monetary Base, M1 Divisia, Swaps, Inflation., WP, full sample, subperiod, excess reserve, Granger, inflation expectation

JEL Classification: Q43, E51, E52, G21, E01, D4, Q02

Suggested Citation

Benk, Szilard and Gillman, Max, Granger Predictability of Oil Prices after the Great Recession (November 2019). IMF Working Paper No. 19/237, Available at SSRN:

Szilard Benk (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314

Max Gillman

University of Missouri at Saint Louis ( email )

1 University Blvd.
St Louis, MO 63121
United States

Central European University (CEU) ( email )

Nador utca 9
Budapest, H-1051

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