FORECASTING THE SOUTH AFRICAN ECONOMY WITH GIBBS SAMPLED BVECMs

Rangan Gupta

South African Journal of Economics, 2007, vol. 75, issue 4, 631-643

Abstract: The paper uses the Gibbs sampling technique to estimate a heteroscedastic Bayesian Vector Error Correction Model (BVECM) of the South African economy for the period 1970:1‐2000:4, and then forecasts GDP, consumption, investment, short and long term interest rates, and the CPI over the period of 2001:1 to 2005:4. We find that a tight prior produces relatively more accurate forecasts than a loose one. The out‐of‐sample‐forecast accuracy resulting from the Gibbs sampled BVECM is compared with those generated from a Classical VECM and a homoscedastic BVECM. The homoscedastic BVECM is found to produce the most accurate out of sample forecasts.

Date: 2007
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https://doi.org/10.1111/j.1813-6982.2007.00141.x

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Working Paper: Forecasting the South African Economy with Gibbs Sampled BVECMs (2007)
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