Real-Time Forecast Evaluation of DSGE Models with Stochastic Volatility

Francis Diebold, Frank Schorfheide and Minchul Shin

No 22615, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Recent work has analyzed the forecasting performance of standard dynamic stochastic general equilibrium (DSGE) models, but little attention has been given to DSGE models that incorporate nonlinearities in exogenous driving processes. Against that background, we explore whether incorporating stochastic volatility improves DSGE forecasts (point, interval, and density). We examine real-time forecast accuracy for key macroeconomic variables including output growth, inflation, and the policy rate. We find that incorporating stochastic volatility in DSGE models of macroeconomic fundamentals markedly improves their density forecasts, just as incorporating stochastic volatility in models of financial asset returns improves their density forecasts.

JEL-codes: E17 (search for similar items in EconPapers)
Date: 2016-09
New Economics Papers: this item is included in nep-dge, nep-ets, nep-for, nep-mac, nep-ore and nep-sog
Note: AP EFG IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Published as Francis X. Diebold & Frank Schorfheide & Minchul Shin, 2017. "Real-time forecast evaluation of DSGE models with stochastic volatility," Journal of Econometrics, vol 201(2), pages 322-332.

Downloads: (external link)
http://www.nber.org/papers/w22615.pdf (application/pdf)

Related works:
Journal Article: Real-time forecast evaluation of DSGE models with stochastic volatility (2017)
Working Paper: Real-time forecast evaluation of DSGE models with stochastic volatility (2017)
Working Paper: Real-Time Forecast Evaluation of DSGE Models with Stochastic Volatility (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:22615

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w22615

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().