A Comparison of Different Short-Term Macroeconomic Forecasting Models: Evidence from Armenia

Karen Poghosyan

Journal of Central Banking Theory and Practice, 2016, vol. 5, issue 2, 81-99

Abstract: We evaluate the forecasting performance of four competing models for short-term macroeconomic forecasting: the traditional VAR, small scale Bayesian VAR, Factor Augmented VAR and Bayesian Factor Augmented VAR models. Using Armenian quarterly actual macroeconomic time series from 1996Q1 – 2014Q4, we estimate parameters of four competing models. Based on the out-of-sample recursive forecast evaluations and using root mean squared error (RMSE) criterion we conclude that small scale Bayesian VAR and Bayesian Factor Augmented VAR models are more suitable for short-term forecasting than traditional unrestricted VAR model.

Keywords: vector autoregression; Bayesian estimation; principal components; recursive regression; forecast evaluation; macroeconomic indicators; Armenia. (search for similar items in EconPapers)
JEL-codes: C11 C13 C52 C53 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:cbk:journl:v:5:y:2016:i:2:p:81-99

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