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Forecasting the South African Economy: A DSGE-VAR Approach

Guangling Liu (), Rangan Gupta () and Eric Schaling ()

No 51, Working Papers from Economic Research Southern Africa

Abstract: This paper develops an estimable hybrid model that combines the micro-founded DSGE model with the flexibility of the theoretical VAR model. The model is estimated via the maximum likelihood technique based on quarterly data on real Gross National Product (GNP), consumption, investment and hours worked, for the South African economy, over the period of 1970:1 to 2000:4. Based on a recursive estimation using the Kalman filter algorithm, the out-of-sample forecasts from the hybrid model are then compared with the forecasts generated from the Classical and Bayesian variants of the VAR for the period 2001:1-2005:4. The results indicate that, in general, the estimated hybrid DSGE model outperforms the Classical VAR, but not the Bayesian VARs in terms of out-of-sample forecasting performances.

Keywords: DSGE Model; VAR and BVAR Model; Forecast Accuracy; DSGE Forecasts; VAR Forecasts; BVAR Forecasts. (search for similar items in EconPapers)
JEL-codes: E17 E27 E32 E37 E47 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2007-07
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Citations: View citations in EconPapers (4) Track citations by RSS feed

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Related works:
Working Paper: Forecasting the South African Economy: A DSGE-VAR Approach (2008) Downloads
Working Paper: Forecasting the South African Economy: A DSGE-VAR Approach (2008) Downloads
Working Paper: Forecasting the South African Economy: A DSGE-VAR Approach (2007)
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