DSGE model-based forecasting of modelled and nonmodelled inflation variables in South Africa
Rangan Gupta (),
Patrick T. Kanda,
Mampho P. Modise and
Open Access publications from School of Economics, University College Dublin
Inflation forecasts are a key ingredient for monetary policy-making – 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, for example alternative measures of inflation that might be of interest to policy-makers, 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 to 2011Q4. The hybrid DSGE performs extremely well in forecasting inflation variables (both core and nonmodelled) in comparison with forecasts reported by other models such as AR(1). In addition, based on ex-ante forecasts over the period 2012Q1–2013Q4, we find that the DSGE model performs better than the AR(1) counterpart in forecasting actual GDP deflator inflation.
Keywords: DSGE model; Inflation; Core variables; Noncore variables (search for similar items in EconPapers)
JEL-codes: C11 C32 C53 E27 E47 (search for similar items in EconPapers)
Pages: 15 pages
New Economics Papers: this item is included in nep-dge, nep-for, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed
Published in: Applied Financial Economics, 47(3) 2015
Downloads: (external link)
http://hdl.handle.net/10197/7351 Open Access version, 2015 (application/pdf)
Journal Article: DSGE model-based forecasting of modelled and nonmodelled inflation variables in South Africa (2015)
Working Paper: DSGE Model-Based Forecasting of Modeled and Non-Modeled Inflation Variables in South Africa (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:ucn:oapubs:10197/7351
Access Statistics for this paper
More papers in Open Access publications from School of Economics, University College Dublin Contact information at EDIRC.
Bibliographic data for series maintained by Nicolas Clifton ().