Evaluating point and density forecasts of DSGE models

Maik Wolters

No 2013-03, Economics Working Papers from Christian-Albrechts-University of Kiel, Department of Economics

Abstract: This paper investigates the accuracy of forecasts from four DSGE models for inflation, output growth and the federal funds rate using a real-time dataset synchronized with the Fed's Greenbook projections. Conditioning the model forecasts on the Greenbook nowcasts leads to forecasts that are as accurate as the Greenbook projections for output growth and the federal funds rate. Only for inflation the model forecasts are dominated by the Greenbook projections. A comparison with forecasts from Bayesian VARs shows that the economic structure of the DSGE models which is useful for the interpretation of forecasts does not lower the accuracy of forecasts. Combining forecasts of several DSGE models increases precision in comparison to individual model forecasts. Comparing density forecasts with the actual distribution of observations shows that DSGE models overestimate uncertainty around point forecasts.

Keywords: DSGE models; Bayesian VAR; forecasting; model uncertainty; forecast combination; density forecasts; real-time data; Greenbook (search for similar items in EconPapers)
JEL-codes: C53 E31 E32 E37 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-dge, nep-ets, nep-for and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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https://www.econstor.eu/bitstream/10419/82623/1/767849566.pdf (application/pdf)

Related works:
Journal Article: Evaluating Point and Density Forecasts of DSGE Models (2015)
Working Paper: Evaluating point and density forecasts of DSGE models (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cauewp:201303

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