FORECASTING THE SOUTH AFRICAN ECONOMY WITH GIBBS SAMPLED BVECMs
The paper uses the 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 forecasts 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. Copyright (c) 2007 The Author. Journal compilation (c) 2007 Economic Society of South Africa.
Volume (Year): 75 (2007)
Issue (Month): 4 (December)
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