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Dynamic Stochastic General Equilibrium Model with Multiple Trends and Structural Breaks

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  • Sergey Ivashchenko

    (Bank of Russia; Institute of Regional Economy Studies; Financial Research Institute)

Abstract

This paper constructs a dynamic stochastic general equilibrium model with various trends for each GDP by expenditure component and structural breaks. The model is estimated on the sample of 20 Russian time series from 2000Q1 to 2020Q4. It produces high-quality out-ofsample forecasts that outperform autoregressive models. Production efficiency shocks explain more than half of the variance of key variables (both conditional and unconditional). The version with structural breaks produces much better median-based forecasting measures and almost the same mean-based forecasting measures due to significant errors near structural breaks. Various inflation measures respond similarly to monetary policy shocks, but differently to other shocks.

Suggested Citation

  • Sergey Ivashchenko, 2022. "Dynamic Stochastic General Equilibrium Model with Multiple Trends and Structural Breaks," Russian Journal of Money and Finance, Bank of Russia, vol. 81(1), pages 46-72, March.
    • Handle: RePEc:bkr:journl:v:81:y:2022:i:1:p:46-72
    DOI: 10.31477/rjmf.202201.46
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    More about this item

    Keywords

    DSGE; trends; unit root; forecast; structural break;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • 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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