Fuel for the Local Economy: House and Oil Prices in Europe's Oil Capital
The economy of Aberdeen, Scotland, is dominated by the oil industry. We argue that the current house price in the city mirrors industry professionals' expectations of the future Brent crude oil price. The current house price should therefore improve oil price forecasts. Using monthly times series covering three decades, we find statistical evidence for such an improvement both in- and out-of-sample. House prices from more economically diversified UK regions do not help to improve oil price forecasts. Relative to the random walk benchmark, the forecast improvements brought by the Aberdeen house price are of equal magnitude to those reported in the recent literature.
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15.01.2015 | 17:00 c.t.
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