EconPapers    
Economics at your fingertips  
 

Forecasting Performance of an Open Economy DSGE Model

Malin Adolfson (), Jesper Lindé and Mattias Villani

Econometric Reviews, 2007, vol. 26, issue 2-4, 289-328

Abstract: This paper analyzes the forecasting performance of an open economy dynamic stochastic general equilibrium (DSGE) model, estimated with Bayesian methods, for the Euro area during 1994Q1-2002Q4. We compare the DSGE model and a few variants of this model to various reduced-form forecasting models such as vector autoregressions (VARs) and vector error correction models (VECM), estimated both by maximum likelihood and two different Bayesian approaches, and traditional benchmark models, e.g., the random walk. The accuracy of point forecasts, interval forecasts and the predictive distribution as a whole are assessed in an out-of-sample rolling event evaluation using several univariate and multivariate measures. The results show that the open economy DSGE model compares well with more empirical models and thus that the tension between rigor and fit in older generations of DSGE models is no longer present. We also critically examine the role of Bayesian model probabilities and other frequently used low-dimensional summaries, e.g., the log determinant statistic, as measures of overall forecasting performance.

Keywords: Bayesian inference; Forecasting; Open economy DSGE model; Vector autoregressive models (search for similar items in EconPapers)
Date: 2007
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (77) Track citations by RSS feed

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/07474930701220543 (text/html)
Access to full text is restricted to subscribers.

Related works:
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:taf:emetrv:v:26:y:2007:i:2-4:p:289-328

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/LECR20

Access Statistics for this article

Econometric Reviews is currently edited by Dr. Essie Maasoumi

More articles in Econometric Reviews from Taylor & Francis Journals
Bibliographic data for series maintained by ().

 
Page updated 2019-04-16
Handle: RePEc:taf:emetrv:v:26:y:2007:i:2-4:p:289-328