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A BVAR Model for the South African Economy

Rangan Gupta () and Moses Sichei
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Moses Sichei: Department of Economics, University of Pretoria

No 200612, Working Papers from University of Pretoria, Department of Economics

Abstract: The paper develops a Bayesian vector autoregressive (BVAR) model of the South African economy for the period of 1970:1-2000:4 and forecasts GDP, consumption, investment, short-term and long term interest rates, and the CPI. We find that a tight prior produces relatively more accurate forecasts than a loose one. The out-of- sample-forecast accuracy resulting from the BVAR model is compared with the same generated from the univariate and unrestricted VAR models. The BVAR model is found to produce the most accurate out of sample forecasts. The same is also capable of correctly predicting the direction of change in the chosen macroeconomic indicators.

Keywords: BVAR Model; Forecast Accuracy; BVAR Forecasts; Univariate Forecasts; VAR Forecasts (search for similar items in EconPapers)
JEL-codes: E17 E27 E37 E47 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2006-06
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