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Forecasting with the New-Keynesian Model: An Experiment with Canadian Data

  • Ali Dib
  • Kevin Moran

This paper documents the out-of-sample forecasting accuracy of the New Keynesian Model for Canadian data. We repeatedly estimate the model over samples of increasing lengths, forecasting out-of-sample one to four quarters ahead at each step. We then compare these forecasts with those arising from an unrestricted VAR using recent econometric tests. We show that the accuracy of the New Keynesian model's forecasts compares favourably to that of the benchmark. The principle of parsimony is invoked to explain these results

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File URL: http://repec.org/sce2005/up.16598.1107125455.pdf
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Paper provided by Society for Computational Economics in its series Computing in Economics and Finance 2005 with number 235.

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Date of creation: 11 Nov 2005
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Handle: RePEc:sce:scecf5:235
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  1. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
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  12. Ingram, Beth F. & Whiteman, Charles H., 1994. "Supplanting the 'Minnesota' prior: Forecasting macroeconomic time series using real business cycle model priors," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 497-510, December.
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  15. repec:cup:cbooks:9780521634809 is not listed on IDEAS
  16. Thomas Doan & Robert B. Litterman & Christopher A. Sims, 1983. "Forecasting and Conditional Projection Using Realistic Prior Distributions," NBER Working Papers 1202, National Bureau of Economic Research, Inc.
  17. Kevin Moran & Veronika Dolar, 2002. "Estimated DGE Models and Forecasting Accuracy: A Preliminary Investigation with Canadian Data," Working Papers 02-18, Bank of Canada.
  18. Harvey, David I & Leybourne, Stephen J & Newbold, Paul, 1998. "Tests for Forecast Encompassing," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(2), pages 254-59, April.
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