Evaluating DSGE model forecasts of comovements

Edward Herbst and Frank Schorfheide

No 11-5, Working Papers from Federal Reserve Bank of Philadelphia

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. The authors construct posterior predictive checks to evaluate the calibration of 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. They 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.

Keywords: Econometric models; Forecasting (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-cba, nep-dge, nep-ecm, nep-ets and nep-for
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Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Evaluating DSGE model forecasts of comovements (2012)
Working Paper: Evaluating DSGE model forecasts of comovements (2012)
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