Granger predictability of real oil prices by us money and inflation in Markov-switching regimes

Kód výsledku v IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F25840886%3A_____%2F25%3AN0000001" target="_blank" >RIV/25840886:_____/25:N0000001 - isvavai.cz</a>

Výsledek na webu

<a href="https://link.springer.com/article/10.1007/s40822-024-00305-8" target="_blank" >https://link.springer.com/article/10.1007/s40822-024-00305-8</a>

DOI - Digital Object Identifier

<a href="http://dx.doi.org/10.1007/s40822-024-00305-8" target="_blank" >10.1007/s40822-024-00305-8</a>

Jazyk výsledku

angličtina

Název v původním jazyce

Granger predictability of real oil prices by us money and inflation in Markov-switching regimes

Popis výsledku v původním jazyce

This paper presents new evidence that US money supply growth and inflation rates Granger predict real oil prices in a two-regime Markov switching vector autoregression (MS-VAR) model. An asset pricing theory motivates the empirical work by showing how jumps in real oil prices approximately follow jumps in the discount factor to keep constant the competitive return to oil capital. Using monthly data from January 1978 to June 2024, we consider alternative data combinations of US money supply growth rates, US inflation rates, and real oil prices to establish volatility regimes through goodness of fit testing. We set baseline model as that model with the highest likelihood in explaining the real oil price, which combines M2, the CPI less energy prices (CPIE), and real oil prices. Robustness considers two M2 variants combined with the CPIE that have the next highest likelihoods, for two alternative models. In the high volatility regime, results show robust Granger predictability of real oil prices by the baseline M2 and the M2 variants. In the low volatility regime for the baseline model, the CPIE inflation rate Granger predicts real oil prices. The paper contributes these new MS-VAR results that combined with the theory provide nuanced non-conventional support that monetary factors contribute to heightened real oil price episodes in volatile times as well as in calmer periods.

Název v anglickém jazyce

Granger predictability of real oil prices by us money and inflation in Markov-switching regimes

Popis výsledku anglicky

This paper presents new evidence that US money supply growth and inflation rates Granger predict real oil prices in a two-regime Markov switching vector autoregression (MS-VAR) model. An asset pricing theory motivates the empirical work by showing how jumps in real oil prices approximately follow jumps in the discount factor to keep constant the competitive return to oil capital. Using monthly data from January 1978 to June 2024, we consider alternative data combinations of US money supply growth rates, US inflation rates, and real oil prices to establish volatility regimes through goodness of fit testing. We set baseline model as that model with the highest likelihood in explaining the real oil price, which combines M2, the CPI less energy prices (CPIE), and real oil prices. Robustness considers two M2 variants combined with the CPIE that have the next highest likelihoods, for two alternative models. In the high volatility regime, results show robust Granger predictability of real oil prices by the baseline M2 and the M2 variants. In the low volatility regime for the baseline model, the CPIE inflation rate Granger predicts real oil prices. The paper contributes these new MS-VAR results that combined with the theory provide nuanced non-conventional support that monetary factors contribute to heightened real oil price episodes in volatile times as well as in calmer periods.

Druh

J_imp - Článek v periodiku v databázi Web of Science

CEP obor

—

OECD FORD obor

50200 - Economics and Business

Projekt

—

Návaznosti

N - Vyzkumna aktivita podporovana z neverejnych zdroju

Rok uplatnění

2025

Kód důvěrnosti údajů

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Název periodika

Eurasian Economic Review

ISSN

2147-429X

e-ISSN

2147-429X

Svazek periodika

15

Číslo periodika v rámci svazku

March

Stát vydavatele periodika

DE - Spolková republika Německo

Počet stran výsledku

24

Strana od-do

29-52

Kód UT WoS článku

001405515800001

EID výsledku v databázi Scopus

2-s2.0-85217246082