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A New-Keynesian DSGE model for forecasting the South African economy

Guangling Liu (), Rangan Gupta () and Eric Schaling ()

Journal of Forecasting, 2009, vol. 28, issue 5, 387-404

Abstract: This paper develops a New-Keynesian Dynamic Stochastic General Equilibrium (NKDSGE) model for forecasting the growth rate of output, inflation, and the nominal short-term interest rate (91 days Treasury Bill rate) for the South African economy. The model is estimated via maximum likelihood technique for quarterly data over the period of 1970:1-2000:4. Based on a recursive estimation using the Kalman filter algorithm, out-of-sample forecasts from the NKDSGE model are compared with forecasts generated from the classical and Bayesian variants of vector autoregression (VAR) models for the period 2001:1-2006:4. The results indicate that in terms of out-of-sample forecasting, the NKDSGE model outperforms both the classical and Bayesian VARs for inflation, but not for output growth and nominal short-term interest rate. However, differences in RMSEs are not significant across the models. Copyright © 2008 John Wiley & Sons, Ltd.

Date: 2009
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Working Paper: A New-Keynesian DSGE Model for Forecasting the South African Economy (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:jof:jforec:v:28:y:2009:i:5:p:387-404

DOI: 10.1002/for.1103

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