Forecasting the South African Economy with Gibbs Sampled BVECMs
AbstractThe paper uses Gibbs sampling technique to estimate a heteroscedastic Bayesian Vector Error Correction Model (BVECM) of the South African economy for the period 1970:1-2000:4, and then forecast GDP, consumption, investment, short and long term interest rates, and the CPI over the period of 2001:1 to 2005:4. We find that a tight prior produces relatively more accurate forecasts than a loose one. The out-of-sample-forecast accuracy resulting from the Gibbs sampled BVECM is compared with those generated from a Classical VECM and a homoscedastic BVECM. The homoscedastic BVECM is found to produce the most accurate out of sample forecasts.
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Bibliographic InfoPaper provided by University of Pretoria, Department of Economics in its series Working Papers with number 200701.
Length: 18 pages
Date of creation: Jan 2007
Date of revision:
VECM and BVECM; Forecast Accuracy; BVECM Forecasts; VECM Forecasts; Gibbs Sampling;
Other versions of this item:
- Rangan Gupta, 2007. "FORECASTING THE SOUTH AFRICAN ECONOMY WITH GIBBS SAMPLED BVECMs," South African Journal of Economics, Economic Society of South Africa, vol. 75(4), pages 631-643, December.
- E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
- E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
- E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
- E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
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- Rangan Gupta & Sonali Das, 2010.
"Predicting Downturns in the US Housing Market: A Bayesian Approach,"
The Journal of Real Estate Finance and Economics,
Springer, vol. 41(3), pages 294-319, October.
- Rangan Gupta & Sonali Das, 2008. "Predicting Downturns in the US Housing Market: A Bayesian Approach," Working Papers 200821, University of Pretoria, Department of Economics.
- Annari de Waal & Renee van Eyden & Rangan Gupta, 2013. "Do we need a global VAR model to forecast inflation and output in South Africa?," Working Papers 201346, University of Pretoria, Department of Economics.
- Mirriam Chitalu Chama-Chiliba & Rangan Gupta & Nonophile Nkambule & Naomi Tlotlego, 2011. "Forecasting Key Macroeconomic Variables of the South African Economy Using Bayesian Variable Selection," Working Papers 201132, University of Pretoria, Department of Economics.
- Caraiani, Petre, 2010. "Forecasting Romanian GDP Using a BVAR Model," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 76-87, December.
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