Comparing Models of Macroeconomic Fluctuations: How Big Are the Differences?
Andra Ghent
MPRA Paper from University Library of Munich, Germany
Abstract:
I generate priors for a VAR from four competing models of economic fluctuations: a standard RBC model, Fisher’s (2006) investment-specific technology shocks model, an RBC model with capital adjustment costs and habit formation, and a sticky price model with an unaccommodating monetary authority. I compare the accuracy of the forecasts made with each of the resulting VARs. The economic models generate similar forecast errors to one another. However, at horizons of one to two years and greater, the models generally yield superior forecasts to those made using both an unrestricted VAR and a VAR that uses shrinkage from a Minnesota prior.
Keywords: Model Evaluation; Priors from DSGE models; Economic Fluctuations; Hours Debate; Business Cycles (search for similar items in EconPapers)
JEL-codes: C11 C52 C53 E3 E32 E37 (search for similar items in EconPapers)
Date: 2006-08
New Economics Papers: this item is included in nep-cba, nep-dge, nep-ecm, nep-for and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:180
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