A Small-Scale DSGE Model for Forecasting the South African Economy
South African Journal of Economics, Vol. 75, No. 2, June 2007
15 Pages Posted: 20 Sep 2010
Date Written: 1992
This paper uses a version of Hansen’s (1985) Dynamic Stochastic General Equilibrium (DSGE) model to forecast the South African economy. The calibrated model, based on annual data over the period of 1970-2000, is used to generate one- to eight-quarters-ahead out-of-sample forecast errors for the period of 2001:1 to 2005:4. The forecast errors are then compared with the unrestricted versions of the Classical and Bayesian VARs. A Bayesian VAR with relatively loose priors outperforms both the classical VAR and the DSGE model.
Keywords: DSGE Model, VAR and BVAR Model, Forecast Accuracy, DSGE Forecasts, VAR Forecasts, BVAR Forecasts
JEL Classification: E17, E27, E32, E37, E47
Suggested Citation: Suggested Citation