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Forecasting Romanian GDP Using a BVAR Model

  • Caraiani, Petre

    ()

    (Institute for Economic Forecasting, Romanian Academy)

In this study I use the Bayesian VAR framework to forecast the dynamics of output for the Romanian economy. I estimate several versions of Bayesian VARs and compare them in terms of forecasting statistics with two standard models, the OLS and the unrestricted VAR, as well as with a naïve forecast. The findings confirm that the BVAR approach outperforms the standard models. The best BVAR model is used for forecasting quarterly GDP in the short run. The results show that the recovery will be slow and that the output gap will continue to be negative for a few quarters even after the economy starts to grow.

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Article provided by Institute for Economic Forecasting in its journal Romanian Journal for Economic Forecasting.

Volume (Year): (2010)
Issue (Month): 4 (December)
Pages: 76-87

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Handle: RePEc:rjr:romjef:v::y:2010:i:4:p:76-87
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  1. Kenny, Geoff & Meyler, Aidan & Quinn, Terry, 1998. "Bayesian VAR Models for Forecasting Irish Inflation," MPRA Paper 11360, University Library of Munich, Germany.
  2. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
  3. Litterman, Robert B, 1986. "Forecasting with Bayesian Vector Autoregressions-Five Years of Experience," Journal of Business & Economic Statistics, American Statistical Association, vol. 4(1), pages 25-38, January.
  4. Kadiyala, K Rao & Karlsson, Sune, 1997. "Numerical Methods for Estimation and Inference in Bayesian VAR-Models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(2), pages 99-132, March-Apr.
  5. Dobrescu, Emilian, 1996. "Macromodels of the Romanian transition Economy," MPRA Paper 35810, University Library of Munich, Germany.
  6. Rangan Gupta, 2007. "Forecasting the South African Economy with Gibbs Sampled BVECMs," Working Papers 200701, University of Pretoria, Department of Economics.
  7. Artis, M. J. & Zhang, W., 1990. "BVAR forecasts for the G-7," International Journal of Forecasting, Elsevier, vol. 6(3), pages 349-362, October.
  8. Dua, Pami & Miller, Stephen M & Smyth, David J, 1999. "Using Leading Indicators to Forecast U.S. Home Sales in a Bayesian Vector Autoregressive Framework," The Journal of Real Estate Finance and Economics, Springer, vol. 18(2), pages 191-205, March.
  9. Rangan Gupta & Moses m. Sichei, 2006. "A Bvar Model For The South African Economy," South African Journal of Economics, Economic Society of South Africa, vol. 74(3), pages 391-409, 09.
  10. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
  11. Caraiani, Petre, 2009. "Forecasting the Romanian GDP in the Long Run Using a Monetary DSGE," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 6(3), pages 75-84, September.
  12. Matteo Ciccarelli & Alessandro Rebucci, 2003. "Bayesian Vars; A Survey of the Recent Literature with An Application to the European Monetary System," IMF Working Papers 03/102, International Monetary Fund.
  13. Pami Dua & Stephen Miller, 1995. "Forecasting and Analyzing Economic Activity with Coincident and Leading Indexes: The Case of Connecticut," Working papers 1995-05, University of Connecticut, Department of Economics.
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