Forecasting in a DSGE Model with Banking Intermediation: Evidence from the US

44 Pages Posted: 11 Feb 2015  

Roberta Cardani

European Commission Joint Research Center - JRC-Ispra, European Commision

Alessia Paccagnini

University College Dublin (UCD) - Michael Smurfit Graduate School of Business

Stefania Villa

University of Foggia; KU Leuven - Faculty of Business and Economics (FEB)

Date Written: February 9, 2015

Abstract

This paper examines the forecasting performance of DSGE models with and without banking intermediation for the US economy. Over the forecast period 2001-2013, the model augmented with a banking sector leads to an improvement of point and density forecasts for inflation and the short term interest rate, while the better forecast for output depends on the forecasting horizon/period. To interpret this finding it is crucial to take into account parameters instabilities showed by a recursive-window estimation. Moreover, rolling estimates of point forecasts show that a banking sector helps improving the forecasting performance of output and inflation in the recent period.

Keywords: Bayesian estimation, Forecasting, Banking sector

JEL Classification: C11, C13, C32, E37

Suggested Citation

Cardani, Roberta and Paccagnini, Alessia and Villa, Stefania, Forecasting in a DSGE Model with Banking Intermediation: Evidence from the US (February 9, 2015). University of Milan Bicocca Department of Economics, Management and Statistics Working Paper No. 292. Available at SSRN: https://ssrn.com/abstract=2563310 or http://dx.doi.org/10.2139/ssrn.2563310

Roberta Cardani

European Commission Joint Research Center - JRC-Ispra, European Commision ( email )

Via Enrico Fermi 2749, Ispra, VA
Ispra (VA), 21027
Italy

Alessia Paccagnini (Contact Author)

University College Dublin (UCD) - Michael Smurfit Graduate School of Business ( email )

Blackrock, Co. Dublin
Ireland

Stefania Villa

University of Foggia

Largo Papa Giovanni Paolo
Foggia, 71100
Italy

KU Leuven - Faculty of Business and Economics (FEB) ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

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