Forecasting using DSGE models with financial frictions

Marcin Kolasa and Michał Rubaszek

International Journal of Forecasting, 2015, vol. 31, issue 1, 1-19

Abstract: This paper compares the quality of forecasts from DSGE models with and without financial frictions. We find that accounting for financial market imperfections does not result in a uniform improvement in the accuracy of point forecasts during non-crisis times, while the average quality of density forecast actually deteriorates. In contrast, adding frictions in the housing market proves very helpful during times of financial turmoil, outperforming both the frictionless benchmark and the alternative that incorporates financial frictions in the corporate sector. Moreover, we detect complementarities among the analyzed setups that can be exploited in the forecasting process.

Keywords: Forecasting; DSGE models; Financial frictions; Housing market (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0169207014000910
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Forecasting with DSGE models with financial frictions (2014)
Working Paper: Forecasting with DSGE models with financial frictions (2013)
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:eee:intfor:v:31:y:2015:i:1:p:1-19

DOI: 10.1016/j.ijforecast.2014.05.001

Access Statistics for this article

International Journal of Forecasting is currently edited by R. J. Hyndman

More articles in International Journal of Forecasting from Elsevier
Bibliographic data for series maintained by Catherine Liu ().