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

See all articles by Rangan Gupta

Rangan Gupta

University of Pretoria - Department of Economics

Dave Liu

Stellenbosch University

Date Written: 1992

Abstract

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

Gupta, Rangan and Liu, Guangling, A Small-Scale DSGE Model for Forecasting the South African Economy (1992). South African Journal of Economics, Vol. 75, No. 2, June 2007, Available at SSRN: https://ssrn.com/abstract=1679359

Rangan Gupta

University of Pretoria - Department of Economics ( email )

Lynnwood Road
Hillcrest
Pretoria, 0002
South Africa

Guangling Liu (Contact Author)

Stellenbosch University ( email )

Stellenbosch, Western Cape 7602
South Africa
27 21 808 2238 (Phone)
27 21 8084637 (Fax)

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