DSGE Model-Based Forecasting of Non-modelled Variables

Frank Schorfheide, Keith Sill () and Maxym Kryshko

No 14872, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper develops and illustrates a simple method to generate a DSGE model-based forecast for variables that do not explicitly appear in the model (non-core variables). We use auxiliary regressions that resemble measurement equations in a dynamic factor model to link the non-core variables to the state variables of the DSGE model. Predictions for the non-core variables are obtained by applying their measurement equations to DSGE model-generated forecasts of the state variables. Using a medium-scale New Keynesian DSGE model, we apply our approach to generate and evaluate recursive forecasts for PCE inflation, core PCE inflation, the unemployment rate, and housing starts along with predictions for the seven variables that have been used to estimate the DSGE model.

JEL-codes: C11 C32 C53 E27 E47 (search for similar items in EconPapers)
Date: 2009-04
New Economics Papers: this item is included in nep-cba, nep-dge, nep-ecm, nep-for and nep-mac
Note: EFG ME
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Citations: View citations in EconPapers (1)

Published as Schorfheide, Frank & Sill, Keith & Kryshko, Maxym, 2010. "DSGE model-based forecasting of non-modelled variables," International Journal of Forecasting, Elsevier, vol. 26(2), pages 348-373, April.

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Journal Article: DSGE model-based forecasting of non-modelled variables (2010)
Working Paper: DSGE model-based forecasting of non-modelled variables (2008)
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