Time-varying persistence in real oil prices and its determinant

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Authors

We provide empirical evidence for pronounced time-variation in the persistence of real oil prices. In particular, we find episodes of mild explosiveness next to periods with random walk and also mean-reverting behavior. We address the question whether dynamic persistence can be directly related to macro-financial variables, spot-futures spreads, spill-over effects from commodities and global real economic activity. Alongside these variables, we use a large data set of more than one-hundred fifty potential determinants featuring, for example, further oil-related variables (production and inventories) and key macroeconomic series for the G7 countries. By using model averaging techniques, we robustly account for the inherent model uncertainty when dealing with such many potential explanatory variables. As it turns out, the one and only significant measure to explain time-varying oil price persistence is the index of global real economic activity by Kilian (2009). Other variables related to e.g. supply shocks or speculation are, however, insignificant. In line with recent findings, we argue that fundamentals rather than speculation were the drivers of the explosive oil price in the 2000s.
OriginalspracheEnglisch
Aufsatznummer104328
ZeitschriftEnergy Economics
Jahrgang85
Anzahl der Seiten10
ISSN0140-9883
DOIs
PublikationsstatusErschienen - 01.2020

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Publisher Copyright:
© 2019 Elsevier B.V.

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Forschende

  1. Mathis Brinkmann

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