Open economy forecasting with a DSGE-VAR: Head to head with the RBNZ published forecasts
AbstractWe construct a DSGE-VAR model for competing head to head with the long history of published forecasts of the Reserve Bank of New Zealand. We also construct a Bayesian VAR model with a Minnesota prior for forecast comparison. The DSGE-VAR model combines a structural DSGE model with a statistical VAR model based on the in-sample fit over the majority of New Zealand's inflation-targeting period. We evaluate the real-time out-of-sample forecasting performance of the DSGE-VAR model, and show that the forecasts from the DSGE-VAR are competitive with the Reserve Bank of New Zealand's published, judgmentally-adjusted forecasts. The Bayesian VAR model with a Minnesota prior also provides a competitive forecasting performance, and generally, with a few exceptions, out-performs both the DSGE-VAR and the Reserve Bank's own forecasts.
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Bibliographic InfoArticle provided by Elsevier in its journal International Journal of Forecasting.
Volume (Year): 27 (2011)
Issue (Month): 2 (April)
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Web page: http://www.elsevier.com/locate/ijforecast
DSGE Vector autoregression models Macroeconomic forecasting Open economy Bayesian methods;
Other versions of this item:
- Lees, Kirdan & Matheson, Troy & Smith, Christie, 2011. "Open economy forecasting with a DSGE-VAR: Head to head with the RBNZ published forecasts," International Journal of Forecasting, Elsevier, vol. 27(2), pages 512-528.
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