Forecasting South African Macroeconomic Variables with a Markov-Switching Small Open-Economy Dynamic Stochastic General Equilibrium Model
Rangan Gupta and
Kevin Kotze ()
No 2016-05, School of Economics Macroeconomic Discussion Paper Series from School of Economics, University of Cape Town
This paper seeks to identify evidence of regime-switching behaviour in the monetary policy response function and the variance of the shocks. It makes use of various specifications of a small open-economy Markov-switching dynamic stochastic general equilibrium (DSGE) model that is applied to South African data from 1989 to 2014. While the in-sample statistics suggest that some of the regime-switching models may provide superior results, the out-of-sample statistics suggest that the inclusion of various forms of regime-switching does not significantly improve upon the forecasting performance of the model. The results also suggest that the central bank response function has been consistently applied over the sample period.
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Journal Article: Forecasting South African macroeconomic variables with a Markov-switching small open-economy dynamic stochastic general equilibrium model (2017)
Working Paper: Forecasting South African Macroeconomic Variables with a Markov-Switching Small Open-Economy Dynamic Stochastic General Equilibrium Model (2016)
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