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FORECASTING PERFORMANCE OF AN ESTIMATED DSGE MODEL FOR THE SOUTH AFRICAN ECONOMY
Author(s) -
Alpanda Sami,
Kotzé Kevin,
Woglom Geoffrey
Publication year - 2011
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.1813-6982.2011.01260.x
Subject(s) - dynamic stochastic general equilibrium , bayesian vector autoregression , economics , econometrics , vector autoregression , bayesian probability , small open economy , random walk , exchange rate , new keynesian economics , bayes estimator , autoregressive model , monetary policy , macroeconomics , mathematics , statistics
We construct a small open‐economy New Keynesian dynamic stochastic general equilibrium (DSGE) model for South Africa with nominal rigidities, incomplete international risk sharing and partial exchange rate pass‐through. The parameters of the model are estimated using Bayesian methods, and its out‐of‐sample forecasting performance is compared with Bayesian vector autoregression (VAR), classical VAR and random‐walk models. Our results indicate that the DSGE model generates forecasts that are competitive with those from other models, and it contributes statistically significant information to combined forecast measures.