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Forecasting a commodity-exporting small open developing economy using DSGE and DSGE-BVAR

Erlan Konebayev

No 24, NAC Analytica Working Paper from NAC Analytica, Nazarbayev University

Abstract: In this paper, we assess the forecasting performance of three types of structural models - DSGE, BVAR with Minnesota priors, and DSGE-BVAR - in the context of a commodity-exporting small open developing economy using the data for Kazakhstan. We find that BVAR and DSGE-BVAR models generally produce point forecasts that are more accurate and less biased compared to those of DSGE in the short term, and that BVAR forecasts rapidly deteriorate in quality as the length of the forecast horizon increases. The density forecast analysis shows that when all variables are considered, one of the BVAR models performs better than DSGE at the one quarter horizon, and when financial sector variables are omitted, one DSGE-BVAR and both BVAR models demonstrate superior performance in the short term.

Keywords: DSGE; DSGE-BVAR; Bayesian estimation; forecasting; small open economy (search for similar items in EconPapers)
JEL-codes: C11 E17 E32 E37 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2022-04, Revised 2022-05
New Economics Papers: this item is included in nep-dge, nep-fdg, nep-for and nep-mac
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Journal Article: Forecasting a Commodity-Exporting Small Open Developing Economy Using DSGE and DSGE-BVAR (2023) Downloads
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