There is some economic research that suggests that oil prices play a central role in causing...
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There is some economic research that suggests that oil prices play a central role in causing recessions in developed countries. In particular, this research suggests that it is specifically increases in oil prices that matter. As a result, economists often look only at the percentage point difference between oil prices at date t and the maximum value over the previous year. However, you notice that energy prices can fluctuate quite dramatically in both directions and believe that geographic areas also benefit substantially from oil price decreases. As a result, you decide to consider the effect of real oil prices [RPoil = (Poil/CPI)] in growth rate form (i.e., ChangRPoilt) on GDP growth (Yt). You estimate the following distributed lag model using annual data (numbers in parenthesis are HAC standard errors): Y = 3.39 0.009 Chang RPoil, (0.27) (0.010) t = 1960-2008, R2 = 0.15, SER = 1.88 0.028 ChangRPoilt-1 (0.011) a. What is the impact effect of a 25-percentage point increase in real oil prices? b. What is the predicted cumulative change in GDP Growth over two years of this effect? c. The HAC F-statistic is 4.07. Can you reject the null hypothesis that oil price changes have no effect on real GDP growth? What is the critical value you considered? Is there any reason why you should be cautious using an F-test in this case, given the sample period? d. Write down the regression you would run in order to figure out cumulative dynamic multipliers and their standard errors directly from the output There is some economic research that suggests that oil prices play a central role in causing recessions in developed countries. In particular, this research suggests that it is specifically increases in oil prices that matter. As a result, economists often look only at the percentage point difference between oil prices at date t and the maximum value over the previous year. However, you notice that energy prices can fluctuate quite dramatically in both directions and believe that geographic areas also benefit substantially from oil price decreases. As a result, you decide to consider the effect of real oil prices [RPoil = (Poil/CPI)] in growth rate form (i.e., ChangRPoilt) on GDP growth (Yt). You estimate the following distributed lag model using annual data (numbers in parenthesis are HAC standard errors): Y = 3.39 0.009 Chang RPoil, (0.27) (0.010) t = 1960-2008, R2 = 0.15, SER = 1.88 0.028 ChangRPoilt-1 (0.011) a. What is the impact effect of a 25-percentage point increase in real oil prices? b. What is the predicted cumulative change in GDP Growth over two years of this effect? c. The HAC F-statistic is 4.07. Can you reject the null hypothesis that oil price changes have no effect on real GDP growth? What is the critical value you considered? Is there any reason why you should be cautious using an F-test in this case, given the sample period? d. Write down the regression you would run in order to figure out cumulative dynamic multipliers and their standard errors directly from the output
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Related Book For
Managing Human Resources
ISBN: 978-1285866390
17th edition
Authors: Scott A. Snell, George W. Bohlander, Shad S. Morris
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