Testing a DSGE model and its partner database

Lavan Mahadeva and Juan Parra-Alvarez

No 4507, Borradores de Economia from Banco de la Republica

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.

Keywords: Monetary Policy; Sectoral Model; DSGE; Forecast Performance; Kalman Filter (search for similar items in EconPapers)
JEL-codes: C61 E01 F47 (search for similar items in EconPapers)
Pages: 66
Date: 2008-01-29
New Economics Papers: this item is included in nep-dge and nep-ecm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Testing a DSGE model and its partner database (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:col:000094:004507

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