Forecasting the Spanish economy with an Augmented VAR-DSGE model

Gonzalo Fernandez-de-Cordoba and Jose Torres ()

No 2009-1, Working Papers from Universidad de Málaga, Department of Economic Theory, Málaga Economic Theory Research Center

Abstract: During the past ten years Dynamic Stochastic General Equilibrium (DSGE) models have become an important tool in quantitative macroeconomics. However, DSGE models was not considered as a forecasting tool until very recently. The objective of this paper is twofold. First, we compare the forecasting ability of a canonical DSGE model for the Spanish economy with other standard econometric techniques. More precisely, we compare out-of-sample forecasts coming from different estimation methods of the DSGE model to the forecasts produced by a VAR and a Bayesian VAR. Second, we propose a new method for combining DSGE and VAR models (Augmented VAR-DSGE) through the expansion of the variable space where the VAR operates with artificial series obtained from a DSGE model. The results indicate that the out-of-sample forecasting performance of the proposed method outperforms all the considered alternatives.

Keywords: DSGE models; forecasting; VAR; BVAR (search for similar items in EconPapers)
JEL-codes: C53 E32 E37 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2009-05
New Economics Papers: this item is included in nep-cba, nep-dge, nep-ecm and nep-for
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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https://theeconomics.uma.es/malagawpseries/Papers/METCwp2009-1.pdf First version, 2009 (application/pdf)

Related works:
Journal Article: Forecasting the Spanish economy with an augmented VAR–DSGE model (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:mal:wpaper:2009-1

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