DGSE Model-Based Forecasting of Modeled and Non-Modeled Inflation Variables in South Africa
Rangan Gupta (),
Mampho Modise and
No 259, Working Papers from University of Milano-Bicocca, Department of Economics
Inflation forecasts are a key ingredient for monetary policymaking - especially in an inflation targeting country such as South Africa. Generally, a typical Dynamic Stochastic General Equilibrium (DSGE) only includes a core set of variables. As such, other variables, e.g. such as alternative measures of inflation that might be of interest to policymakers, do not feature in the model. Given this, we implement a closed-economy New Keynesian DSGE model-based procedure which includes variables that do not explicitly appear in the model. We estimate such a model using an in-sample covering 1971Q2 to 1999Q4, and generate recursive forecasts over 2000Q1-2011Q4. The hybrid DSGE performs extremely well in forecasting inflation variables (both core and non-modeled) in comparison with forecasts reported by other models such as AR(1).
Keywords: DSGE model; in ation; core variables; non-core variables (search for similar items in EconPapers)
JEL-codes: C11 C32 C53 E27 E47 (search for similar items in EconPapers)
Date: 2013-11, Revised 2013-11
New Economics Papers: this item is included in nep-afr, nep-dge, nep-for, nep-mac and nep-mon
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Working Paper: DSGE Model-Based Forecasting of Modeled and Non-Modeled Inflation Variables in South Africa (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:mib:wpaper:259
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