Increases in oil prices have been blamed for several recessions in developed countries. To quantify the effect of oil prices on real economic activity, researchers have run regressions like those discussed in this chapter. Let GDP+ denote the value of quarterly gross domestic product in the United States and let Y₁ = 100In (GDP+ | GDP (-1) be the quarterly percentage change in GDP. James Hamilton, an econometrician and macroeconomist, has suggested that oil prices adversely affect that economy only when they jump above their values in the recent past. Specifically, let O, equal the greater of zero or the percentage point difference between oil prices at date t and their maximum value during the past 3 years. A distributed lag regression relating Y, and Or, estimated over 1960:Q1-2013:Q4, is 1.1 -0.0080-0.0150 -1 -0.01901 -2 -0.02401-3 -0.03801-4 -0.0130-5 (0.1) (0.013) (0.011) (0.011) (0.010) (0.012) +0.0050-6 0.0080 - 7 + 0.006 O+-8 (0.010) (0.008) (0.008) (0.008) Suppose that oil prices jump 20% above their previous peak value and stay at this new higher level (so that O₁ = 20 and O++ 1 = Оt+ 2 ··· = 0). Calculate the predicted (percentage point) effect on output growth for each quarter over the next 2 years. (Round your responses to three decimal places.) The immediate effect on output in the current period is %. After 1 quarter = %. After 2 quarters = %. After 3 quarters = %. After 4 quarters = %. After 5 quarters = %. After 6 quarters = %. After 8 quarters After 7 quarters = %. %.
Increases in oil prices have been blamed for several recessions in developed countries. To quantify the effect of oil prices on real economic activity, researchers have run regressions like those discussed in this chapter. Let GDP+ denote the value of quarterly gross domestic product in the United States and let Y₁ = 100In (GDP+ | GDP (-1) be the quarterly percentage change in GDP. James Hamilton, an econometrician and macroeconomist, has suggested that oil prices adversely affect that economy only when they jump above their values in the recent past. Specifically, let O, equal the greater of zero or the percentage point difference between oil prices at date t and their maximum value during the past 3 years. A distributed lag regression relating Y, and Or, estimated over 1960:Q1-2013:Q4, is 1.1 -0.0080-0.0150 -1 -0.01901 -2 -0.02401-3 -0.03801-4 -0.0130-5 (0.1) (0.013) (0.011) (0.011) (0.010) (0.012) +0.0050-6 0.0080 - 7 + 0.006 O+-8 (0.010) (0.008) (0.008) (0.008) Suppose that oil prices jump 20% above their previous peak value and stay at this new higher level (so that O₁ = 20 and O++ 1 = Оt+ 2 ··· = 0). Calculate the predicted (percentage point) effect on output growth for each quarter over the next 2 years. (Round your responses to three decimal places.) The immediate effect on output in the current period is %. After 1 quarter = %. After 2 quarters = %. After 3 quarters = %. After 4 quarters = %. After 5 quarters = %. After 6 quarters = %. After 8 quarters After 7 quarters = %. %.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Increases in oil prices have been blamed for several recessions in developed countries. To quantify the effect of oil prices on real economic activity,
researchers have run regressions like those discussed in this chapter. Let GDP+ denote the value of quarterly gross domestic product in the United
States and let Y₁ = 100In (GDP+ | GDP (-1) be the quarterly percentage change in GDP.
James Hamilton, an econometrician and macroeconomist, has suggested that oil prices adversely affect that economy only when they jump above their
values in the recent past. Specifically, let O, equal the greater of zero or the percentage point difference between oil prices at date t and their maximum
value during the past 3 years. A distributed lag regression relating Y, and Or, estimated over 1960:Q1-2013:Q4, is
1.1 -0.0080-0.0150 -1 -0.01901 -2 -0.02401-3 -0.03801-4 -0.0130-5
(0.1) (0.013)
(0.011)
(0.011)
(0.010)
(0.012)
+0.0050-6 0.0080 - 7 + 0.006 O+-8
(0.010) (0.008)
(0.008)
(0.008)
Suppose that oil prices jump 20% above their previous peak value and stay at this new higher level (so that O₁ = 20 and O++ 1 = Оt+ 2 ··· = 0).
Calculate the predicted (percentage point) effect on output growth for each quarter over the next 2 years. (Round your responses to three decimal
places.)
The immediate effect on output in the current period is
%.
After 1 quarter =
%.
After 2 quarters =
%.
After 3 quarters =
%.
After 4 quarters =
%.
After 5 quarters =
%.
After 6 quarters =
%.
After 8 quarters
After 7 quarters = %.
%.
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