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Testing a DSGE model and its partner database

  • Lavan Mahadeva

    ()

  • Juan Carlos parra

    ()

There is now an impetus to apply dynamic stochastic general equilibrium models to forecasting. But thesemodels typically rely on purpose-built data, for example on tradable and nontradable sector outputs.How then do we know that the model will forecast well, in advance? We develop an early warning test ofthe database-model match and apply that to a Colombian model. Our test reveals where the combinationshould work (consumption) and where not (in investment). The test can be adapted to look at manylikely sources of DSGE model failure.

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Paper provided by BANCO DE LA REPÚBLICA in its series BORRADORES DE ECONOMIA with number 004507.

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Length: 66
Date of creation: 29 Jan 2008
Date of revision:
Handle: RePEc:col:000094:004507
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  17. Andrés González & Lavan Mahadeva & Juan D. Prada & Diego Rodríguez, 2011. "Policy Analysis Tool Applied to Colombian Needs: PATACON Model Description," BORRADORES DE ECONOMIA 008698, BANCO DE LA REPÚBLICA.
  18. Susanto Basu, 1994. "Intermediate Goods and Business Cycles: Implications for Productivity and Welfare," NBER Working Papers 4817, National Bureau of Economic Research, Inc.
  19. Diewert, Erwin, 2007. "Index Numbers," Economics working papers diewert-07-01-03-08-17-23, Vancouver School of Economics, revised 31 Jan 2007.
  20. Adolfson, Malin & Andersson, Michael K. & Lindé, Jesper & Villani, Mattias & Vredin, Anders, 2005. "Modern Forecasting Models in Action: Improving Macroeconomic Analyses at Central Banks," Working Paper Series 188, Sveriges Riksbank (Central Bank of Sweden), revised 01 Jun 2006.
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