Medium-Term Forecasting of Euro-Area Macroeconomic Variables with DSGE and BVARX Models

21 Pages Posted: 18 Apr 2015  

Lorenzo Burlon

Bank of Italy

Simone Emiliozzi

Bank of Italy

Alessandro Notarpietro

Bank of Italy

Massimiliano Pisani

Bank of Italy

Date Written: January 22, 2015

Abstract

The paper assesses the performance of medium-term forecasts of euro-area GDP and inflation obtained with a DSGE model and a BVARX model currently in use at the Bank of Italy. The performance is compared with that of simple univariate models and with the Eurosystem projections; the same real time assumptions underlying the latter are used to condition the DSGE and the BVARX forecasts. We find that the performance of both forecasts is similar to that of Eurosystem forecasts and overall more accurate than that of simple autoregressive models. The DSGE model shows a relatively better performance in forecasting inflation, while the BVARX model fares better in forecasting.

Keywords: forecasting, DSGE, BVARX, euro area

JEL Classification: C53, E32, E37

Suggested Citation

Burlon, Lorenzo and Emiliozzi, Simone and Notarpietro, Alessandro and Pisani, Massimiliano, Medium-Term Forecasting of Euro-Area Macroeconomic Variables with DSGE and BVARX Models (January 22, 2015). Bank of Italy Occasional Paper No. 257. Available at SSRN: https://ssrn.com/abstract=2595129 or http://dx.doi.org/10.2139/ssrn.2595129

Lorenzo Burlon (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Simone Emiliozzi

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Alessandro Notarpietro

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Massimiliano Pisani

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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