Evaluating DSGE model forecasts of comovements

Edward Herbst and Frank Schorfheide

No 2012-11, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper develops and applies tools to assess multivariate aspects of Bayesian Dynamic Stochastic General Equilibrium (DSGE) model forecasts and their ability to predict comovements among key macroeconomic variables. We construct posterior predictive checks to evaluate conditional and unconditional density forecasts, in addition to checks for root-mean-squared errors and event probabilities associated with these forecasts. The checks are implemented on a three-equation DSGE model as well as the Smets and Wouters (2007) model using real-time data. We find that the additional features incorporated into the Smets-Wouters model do not lead to a uniform improvement in the quality of density forecasts and prediction of comovements of output, inflation, and interest rates.

Date: 2012
New Economics Papers: this item is included in nep-dge, nep-ets and nep-for
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Citations: View citations in EconPapers (55)

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Related works:
Journal Article: Evaluating DSGE model forecasts of comovements (2012)
Working Paper: Evaluating DSGE model forecasts of comovements (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2012-11

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