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Testing a DSGE model and its partner database

Author

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  • Lavan Mahadeva
  • Juan Carlos parra

Abstract

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.

Suggested Citation

  • Lavan Mahadeva & Juan Carlos parra, 2008. "Testing a DSGE model and its partner database," Borradores de Economia 4507, Banco de la Republica.
    • Handle: RePEc:col:000094:004507
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    References listed on IDEAS

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    Cited by:

    1. Enrique López & Andrés Salamanca, 2009. "El efecto riqueza de la vivienda en Colombia," Coyuntura Económica, Fedesarrollo, December.
    2. Ramiro Rodríguez Revilla, 2011. "Modelos de equilibrio general dinámicos y estocásticos para Colombia 1995-2011," Revista Ecos de Economía, Universidad EAFIT, December.

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    More about this item

    Keywords

    Monetary Policy; Sectoral Model; DSGE; Forecast Performance; Kalman Filter;
    All these keywords.

    JEL classification:

    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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