EconPapers    
Economics at your fingertips  
 

Forecasting with DSGE Models: The Role of Nonlinearities

Paul Pichler ()

The B.E. Journal of Macroeconomics, 2008, vol. 8, issue 1, 35

Abstract: This paper studies whether the out-of-sample forecasting performance of a dynamic stochastic general equilibrium (DSGE) model improves by taking its nonlinear rather than its linear approximation to the data. We address this question within a New Keynesian monetary economy, considering both environments of simulated and real data. Precisely, we estimate our model based on its linear respectively quadratic approximate solution, generate out-of-sample forecasts for three observables (output, inflation, and the nominal interest rate), and compare the quality of forecasts by several statistical measures of accuracy. We find that the value of nonlinearities in terms of predictive power depends crucially on whether the model is well specified. For simulated data, the nonlinear model indeed forecasts noticeably better as compared to its linearized counterpart, whereas for real data, we find no substantial differences in predictive abilities.

Keywords: forecasting; DSGE models; nonlinearities; particle filter; Kalman filter (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

Downloads: (external link)
https://doi.org/10.2202/1935-1690.1675 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
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:bpj:bejmac:v:8:y:2008:i:1:n:20

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/bejm/html

DOI: 10.2202/1935-1690.1675

Access Statistics for this article

The B.E. Journal of Macroeconomics is currently edited by Arpad Abraham and Tiago Cavalcanti

More articles in The B.E. Journal of Macroeconomics from De Gruyter
Bibliographic data for series maintained by Peter Golla ().

 
Page updated 2025-03-19
Handle: RePEc:bpj:bejmac:v:8:y:2008:i:1:n:20