Real-time forecast evaluation of DSGE models with stochastic volatility
- Recent work has analyzed the forecasting performance of standard dynamic stochastic general equilibrium (DSGE) models, but little attention has been given to DSGE models that incorporate nonlinearities in exogenous driving processes. Against that background, we explore whether incorporating stochastic volatility improves DSGE forecasts (point, interval, and density). We examine real-time forecast accuracy for key macroeconomic variables including output growth, inflation, and the policy rate. We find that incorporating stochastic volatility in DSGE models of macroeconomic fundamentals markedly improves their density forecasts, just as incorporating stochastic volatility in models of financial asset returns improves their density forecasts.
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| Author: | Francis X. Diebold, Frank Schorfheide, Minchul Shin |
|---|---|
| URN: | urn:nbn:de:hebis:30:3-438631 |
| URL: | https://ssrn.com/abstract=3042684 |
| Parent Title (English): | Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 577 |
| Series (Serial Number): | CFS working paper series (577) |
| Publisher: | Center for Financial Studies |
| Place of publication: | Frankfurt, M. |
| Document Type: | Working Paper |
| Language: | English |
| Year of Completion: | 2017 |
| Year of first Publication: | 2017 |
| Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
| Release Date: | 2017/10/17 |
| Tag: | Dynamic Stochastic General Equilibrium Model; Prediction; Stochastic Volatility |
| Issue: | August 18, 2016 |
| Page Number: | 53 |
| HeBIS-PPN: | 419157018 |
| Institutes: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
| Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) | |
| Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
| Sammlungen: | Universitätspublikationen |
| Licence (German): |  Deutsches Urheberrecht |
