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Dynamic Stochastic General Equilibrium Model with Multiple Trends and Structural Breaks

Sergey Ivashchenko ()
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Sergey Ivashchenko: Bank of Russia; Institute of Regional Economy Studies; Financial Research Institute

Russian Journal of Money and Finance, 2022, vol. 81, issue 1, 46-72

Abstract: This paper constructs a dynamic stochastic general equilibrium model with various trends for each GDP by expenditure component and structural breaks. The model is estimated on the sample of 20 Russian time series from 2000Q1 to 2020Q4. It produces high-quality out-ofsample forecasts that outperform autoregressive models. Production efficiency shocks explain more than half of the variance of key variables (both conditional and unconditional). The version with structural breaks produces much better median-based forecasting measures and almost the same mean-based forecasting measures due to significant errors near structural breaks. Various inflation measures respond similarly to monetary policy shocks, but differently to other shocks.

Keywords: DSGE; trends; unit root; forecast; structural break (search for similar items in EconPapers)
JEL-codes: C53 E32 E37 E47 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.31477/rjmf.202201.46

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