Working Paper: NBER ID: w27001
Authors: Christiane Baumeister; Dimitris Korobilis; Thomas K. Lee
Abstract: This paper evaluates alternative indicators of global economic activity and other market fundamentals in terms of their usefulness for forecasting real oil prices and global petroleum consumption. We find that world industrial production is one of the most useful indicators that has been proposed in the literature. However, by combining measures from a number of different sources we can do even better. Our analysis results in a new index of global economic conditions and new measures for assessing future tightness of energy demand and expected oil price pressures.
Keywords: energy markets; global economic conditions; oil prices; petroleum consumption; forecasting
JEL Codes: C11; C32; C52; Q41; Q47
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| world industrial production (L69) | real oil prices (Q31) |
| various measures of global economic conditions (F69) | forecasting accuracy (C53) |
| additional determinants of energy demand (Q41) | forecast accuracy for petroleum consumption (Q47) |
| Bayesian shrinkage methods (C11) | predictive performance (C52) |
| models based on alternative measures of global economic conditions (E17) | forecasting oil prices (Q47) |