BVAR Forecasts of the World Economy

Michael Artis and Wenda Zhang

No 380, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper provides forecasts derived from Bayesian vector autoregressive (BVAR) models for the output growth, inflation and balance of payments of the G-5 and G-7 countries. These forecasts are compared with those derived from alternative time series models and with those provided by the International Monetary Fund in its World Economic Outlook (WEO) over the period 1980-7, as well as with the out-turns. The importance of setting up a proper prior and the sensitivity of forecast performance to information are two issues addressed in the paper. The results suggest significant gains from the use of BVAR models; as a minimum, these models provide a highly effective standard of comparison for forecasts derived in more traditional ways.

Keywords: BVAR; Forecast Accuracy; World Economy (search for similar items in EconPapers)
Date: 1990-03
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