Do oil prices predict economic growth? New global evidence

In this paper, we test whether oil price predicts economic growth for 28 developed and 17 developing countries. We use predictability tests that account for the key features of the data, namely, persistency, endogeneity, and heteroskedasticity. Our analysis considers a large number of countries, shows evidence of more out-of-sample predictability with nominal than real oil prices, finds in-sample predictability to be independent of the use of nominal and real prices, and reveals greater evidence of predictability for developed countries. •We test whether oil price predicts economic growth.•Persistency, endogeneity, and heteroskedasticity properties of data are modelled.•More out-of-sample predictability with nominal than real oil prices is found.•In-sample predictability is independent of the use of nominal and real prices.•Greater evidence of predictability is found for developed countries.