A new approach to multi-step forecasting using dynamic stochastic general equilibrium models

George Kapetanios, Simon Price and Konstantinos Theodoridis

Economics Letters, 2015, vol. 136, issue C, 237-242

Abstract: DSGE models are of interest because they offer structural interpretations, but are also increasingly used for forecasting. Estimation often proceeds by methods which involve building the likelihood by one-step ahead (h=1) prediction errors. However in principle this can be done using different horizons where h>1. Using the well-known model of Smets and Wouters (2007), for h=1 classical ML parameter estimates are similar to those originally reported. As h extends some estimated parameters change, but not to an economically significant degree. Forecast performance is often improved, in several cases significantly.

Keywords: DSGE models; Multi-step errors; Forecasting (search for similar items in EconPapers)
JEL-codes: C5 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:136:y:2015:i:c:p:237-242

DOI: 10.1016/j.econlet.2015.09.034

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