EconPapers    
Economics at your fingertips  
 

How Good are Out of Sample Forecasting Tests on DSGE Models?

A. Patrick Minford, Yongdeng Xu () and Peng Zhou ()

Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, 2015, vol. 1, issue 3, 333-351

Abstract: Out-of-sample forecasting tests of DSGE models against time-series benchmarks such as an unrestricted VAR are increasingly used to check (a) the specification and (b) the forecasting capacity of these models. We carry out a Monte Carlo experiment on a widely-used DSGE model to investigate the power of these tests. We find that in specification testing they have weak power relative to an in-sample indirect inference test; this implies that a DSGE model may be badly mis-specified and still improve forecasts from an unrestricted VAR. In testing forecasting capacity they also have quite weak power, particularly on the lefthand tail. By contrast a model that passes an indirect inference test of specification will almost definitely also improve on VAR forecasts. Copyright Società Italiana degli Economisti (Italian Economic Association) 2015

Keywords: Out of sample forecasts; DSGE; VAR; Specification tests; Indirect inference; Forecast performance; E10; E17 (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) Track citations by RSS feed

Downloads: (external link)
http://hdl.handle.net/10.1007/s40797-015-0020-9 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: How good are out of sample forecasting Tests on DSGE models? (2014) Downloads
Working Paper: How good are out of sample forecasting Tests on DSGE models? (2014) Downloads
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:spr:italej:v:1:y:2015:i:3:p:333-351

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/40797

DOI: 10.1007/s40797-015-0020-9

Access Statistics for this article

Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti is currently edited by Roberto Cellini

More articles in Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti from Springer, Società Italiana degli Economisti (Italian Economic Association) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla ().

 
Page updated 2020-03-29
Handle: RePEc:spr:italej:v:1:y:2015:i:3:p:333-351