IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Forecasting macroeconomic variables in a small open economy: a comparison between small- and large-scale models

  • Rangan Gupta

    (Department of Economics, University of Pretoria, South Africa)

  • Alain Kabundi

    (Department of Economics and Econometrics, University of Johannesburg, South Africa)

This paper compares the forecasting ability of five alternative types of models in predicting four key macroeconomic variables, namely, per capita growth rate, the CPI inflation, the money market rate, and the growth rate of the nominal effective exchange rate for the South African economy. Unlike the theoretical small open economy new Keynesian dynamic stochastic general equilibrium, the unrestricted VAR, and the small-scale Bayesian vector autoregressive models, which are estimated based on four variables, dynamic factor models and the large-scale BVAR models use information from a data-rich environment containing 266 macroeconomic time series observed over the period 1983:01 to 2002:04. The results, based on root mean square errors, for one- to eight-quarter-ahead out-of-sample forecasts over the horizon of 2003:01 to 2006:04, show that, except for the growth rate of the of nominal effective exchange rate, large-scale BVARs outperform the other four types of models consistently and, generally, significantly. Copyright © 2010 John Wiley & Sons, Ltd.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://hdl.handle.net/10.1002/for.1143
File Function: Link to full text; subscription required
Download Restriction: no

Article provided by John Wiley & Sons, Ltd. in its journal Journal of Forecasting.

Volume (Year): 29 (2010)
Issue (Month): 1-2 ()
Pages: 168-185

as
in new window

Handle: RePEc:jof:jforec:v:29:y:2010:i:1-2:p:168-185
Contact details of provider: Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/2966

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:jof:jforec:v:29:y:2010:i:1-2:p:168-185. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)

or (Christopher F. Baum)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.