There is a long tradition of using oil prices to forecast U.S. real GDP. It has been suggested that the predictive relationship between the price of oil and one-quarter ahead U.S. real GDP is nonlinear in that (1) oil price increases matter only to the extent that they exceed the maximum oil...

Although oil price shocks have long been viewed as one of the leading candidates for explaining U.S. recessions, surprisingly little is known about the extent to which oil price shocks explain recessions. We provide the first formal analysis of this question with special attention to the...

A common view in the literature is that the effect of energy price shocks on macroeconomic aggregates is asymmetric in energy price increases and decreases. We show that widely used asymmetric vector autoregressive models of the transmission of energy price shocks are misspecified, resulting in...

We address some of the key questions that arise in forecasting the price of crude oil. What do applied forecasters need to know about the choice of sample period and about the tradeoffs between alternative oil price series and model specifications? Are real or nominal oil prices predictable...

It is customary to suggest that the asymmetry in the transmission of oil price shocks to real output is well established. Much of the empirical work cited as being in support of asymmetries, however, has not directly tested the hypothesis of an asymmetric transmission of oil price innovations....

In the absence of a major disruption in spending by consumers and firms, the effects of energy price shocks on the economy will be small. In this paper, we quantify the direct effect on real consumption of (1) unanticipated changes in discretionary income, (2) shifts in precautionary savings,...

It is standard in applied work to select forecasting models by ranking candidate models by their prediction mean squared error (PMSE) in simulated out-of-sample (SOOS) forecasts. Alternatively, forecast models may be selected using information criteria (IC). We compare the asymptotic and...

Large fluctuations in energy prices have been a distinguishing characteristic of the U.S. economy since the 1970s. Turmoil in the Middle East, rising energy prices in the U.S. and evidence of global warming recently have reignited interest in the link between energy prices and economic...

Some observers have conjectured that the decline in the price of oil after June 2014 resulted from positive oil supply shocks in the second half of 2014. Others have suggested that a major shock to oil price expectations occurred when in late November 2014 OPEC announced that it would maintain...

Research on oil markets conducted during the last decade has challenged long-held beliefs about the causes and consequences of oil price shocks. As the empirical and theoretical models used by economists have evolved, so has our understanding of the determinants of oil price shocks and of the...