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WHAT CENTRAL BANKERS NEED TO KNOW ABOUT FORECASTING OIL PRICES
Author(s) -
Baumeister Christiane,
Kilian Lutz
Publication year - 2014
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12074
Subject(s) - economics , consensus forecast , oil price , econometrics , futures contract , autoregressive model , range (aeronautics) , economic forecasting , financial economics , monetary economics , engineering , aerospace engineering
Central banks routinely use short‐horizon forecasts of the quarterly price of oil in assessing the global and domestic economic outlook. We address a number of econometric issues specific to the construction of quarterly oil price forecasts in the United States and abroad. We show that quarterly forecasts of the real price of oil from suitably designed vector autoregressive models estimated on monthly data generate the most accurate real‐time forecasts overall among a wide range of methods, including quarterly averages of forecasts based on monthly oil futures prices, no‐change forecasts, and forecasts based on regression models estimated on quarterly data.