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A BVAR MODEL FOR THE SOUTH AFRICAN ECONOMY
Author(s) -
Gupta Rangan,
Sichei Moses M.
Publication year - 2006
Publication title -
south african journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.502
H-Index - 31
eISSN - 1813-6982
pISSN - 0038-2280
DOI - 10.1111/j.1813-6982.2006.00077.x
Subject(s) - bayesian vector autoregression , univariate , autoregressive model , econometrics , economics , term (time) , bayesian probability , vector autoregression , sample (material) , multivariate statistics , mathematics , statistics , thermodynamics , physics , quantum mechanics
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.