ShanghaiTech SEM Working Paper No. 2018-004
John M. Maheu
McMaster University and RCEA - DeGroote School of Business
University of Melbourne and RCEA
ShanghaiTech University - School of Entrepreneurship and Management
This paper shows that oil shocks primarily impact economic growth through the conditional variance of growth. We move beyond the literature that focuses on conditional mean point forecasts and compare models based on density forecasts. Over a range of dynamic models, oil shock measures and data we nd a robust link between oil shocks and the volatility of economic growth...
Keywords: Bayes factors, predictive likelihoods, nonlinear dynamics, density forecast
Date Written: December 2017