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Comparing DSGE-VAR forecasting models: How big are the differences?

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  • Ghent, Andra C.

Abstract

I generate priors for a vector autoregression (VAR) from a standard real business cycle (RBC) model, an RBC model with capital-adjustment costs and habit formation, and a sticky-price model with an unaccommodating monetary authority. The response of hours worked to a TFP shock differs sharply across these models. I compare the accuracy of forecasts made from each of the resulting dynamic stochastic general equilibrium vector autoregression (DSGE-VAR) models. Despite having different structural characteristics, the DSGE-VARs are comparable in terms of forecasting performance. As in previous work, DSGE-VARs compare favorably with atheoretical VARs.

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  • Ghent, Andra C., 2009. "Comparing DSGE-VAR forecasting models: How big are the differences?," Journal of Economic Dynamics and Control, Elsevier, vol. 33(4), pages 864-882, April.
  • Handle: RePEc:eee:dyncon:v:33:y:2009:i:4:p:864-882
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    Cited by:

    1. Bekiros Stelios & Paccagnini Alessia, 2015. "Estimating point and density forecasts for the US economy with a factor-augmented vector autoregressive DSGE model," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 19(2), pages 107-136, April.
    2. Negro, Marco Del & Schorfheide, Frank, 2013. "DSGE Model-Based Forecasting," Handbook of Economic Forecasting, Elsevier.
    3. Paccagnini, Alessia, 2017. "Dealing with Misspecification in DSGE Models: A Survey," MPRA Paper 82914, University Library of Munich, Germany.
    4. Alessia Paccagnini, 2012. "Comparing Hybrid DSGE Models," Working Papers 228, University of Milano-Bicocca, Department of Economics, revised Dec 2012.
    5. Stelios D. Bekiros & Alessia Paccagnini, 2016. "Policy‐Oriented Macroeconomic Forecasting with Hybrid DGSE and Time‐Varying Parameter VAR Models," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 35(7), pages 613-632, November.
    6. Stelios Bekiros & Alessia Paccagnini, 2013. "On the predictability of time-varying VAR and DSGE models," Empirical Economics, Springer, vol. 45(1), pages 635-664, August.
    7. Bekiros, Stelios D. & Paccagnini, Alessia, 2014. "Bayesian forecasting with small and medium scale factor-augmented vector autoregressive DSGE models," Computational Statistics & Data Analysis, Elsevier, vol. 71(C), pages 298-323.
    8. Boubaker, Sabri & Nguyen, Duc Khuong & Paltalidis, Nikos, 2016. "Fiscal Policy Interventions at the Zero Lower Bound," MPRA Paper 84673, University Library of Munich, Germany, revised Aug 2017.
    9. Christoffel, Kai & Warne, Anders & Coenen, Günter, 2010. "Forecasting with DSGE models," Working Paper Series 1185, European Central Bank.

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