Estimating point and density forecasts for the US economy with a factor-augmented vector autoregressive DSGE model

Stelios Bekiros and Alessia Paccagnini

Studies in Nonlinear Dynamics & Econometrics, 2015, vol. 19, issue 2, 107-136

Abstract: Although policymakers and practitioners are particularly interested in dynamic stochastic general equilibrium (DSGE) models, these are typically too stylized to be applied directly to the data and often yield weak prediction results. Very recently, hybrid DSGE models have become popular for dealing with some of the model misspecifications. Major advances in estimation methodology could allow these models to outperform well-known time series models and effectively deal with more complex real-world problems as richer sources of data become available. In this study we introduce a Bayesian approach to estimate a novel factor augmented DSGE model that extends the model of Consolo et al. [Consolo, A., Favero, C.A., and Paccagnini, A., 2009. On the Statistical Identification of DSGE Models. Journal of Econometrics, 150, 99–115]. We perform a comparative predictive evaluation of point and density forecasts for many different specifications of estimated DSGE models and various classes of VAR models, using datasets from the US economy including real-time data. Simple and hybrid DSGE models are implemented, such as DSGE-VAR and tested against standard, Bayesian and factor augmented VARs. The results can be useful for macro-forecasting and monetary policy analysis.

Keywords: density forecasting; marginal data density; DSGE-FAVAR; real-time data (search for similar items in EconPapers)
JEL-codes: C11 C15 C32 C53 D58 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://doi.org/10.1515/snde-2013-0061 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
Working Paper: Estimating point and density forecasts for the US economy with a factor-augmented vector autoregressive DSGE model (2014)
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:sndecm:v:19:y:2015:i:2:p:107-136:n:3

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

DOI: 10.1515/snde-2013-0061

Access Statistics for this article

Studies in Nonlinear Dynamics & Econometrics is currently edited by Bruce Mizrach

More articles in Studies in Nonlinear Dynamics & Econometrics from De Gruyter
Bibliographic data for series maintained by Peter Golla ().