Nine of the ten recessions since WWII have been preceded by relatively large and sudden increases in the price of oil. In this paper, I use time series analysis to forecast GDP growth using oil prices. I use the methodology from Hamilton (2009), and extend the dataset through 2010. Impulse response functions are used to analyze the historical performance of the model’s one-year-ahead forecasts. In April, 2011, the International Monetary Fund changed its forecast of 2011 GDP growth in the U.S. from 3.0% to 2.8% largely due to persistently high oil prices. My model suggests that the price increase in 2011Q1 will lead to growth of 2% in 2011. Furthermore, my model predicts that a 54% increase in crude oil prices during the second quarter of 2011 will lead the U.S. into a double dip recession.
| Identifer | oai:union.ndltd.org:CLAREMONT/oai:scholarship.claremont.edu:cmc_theses-1158 |
| Date | 01 January 2011 |
| Creators | Bauch, Jacob H. |
| Publisher | Scholarship @ Claremont |
| Source Sets | Claremont Colleges |
| Detected Language | English |
| Type | text |
| Format | application/pdf |
| Source | CMC Senior Theses |
| Rights | © 2011 Jacob Bauch |
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