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Putting the New Keynesian DSGE Model to the Real‐Time Forecasting Test

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  • MARCIN KOLASA
  • MICHAŁ RUBASZEK
  • PAWEŁ SKRZYPCZYŃSKI

Abstract

The paper compares the quality of real‐time forecasts from a standard medium‐scale New Keynesian dynamic stochastic general equilibrium (DSGE) model to those from the Survey of Professional Forecasters (SPF) and DSGE‐VARs. It is shown that the DSGE model is relatively successful in forecasting the U.S. economy. This is especially true for forecasts conditional on SPF nowcasts, in which case the forecasting power of the DSGE turns out to be similar or better than that of the SPF for all the variables and horizons. An important weakness of the benchmark DSGE model is the poor absolute performance of its point forecasts and rather badly calibrated forecast densities.

Suggested Citation

  • Marcin Kolasa & Michał Rubaszek & Paweł Skrzypczyński, 2012. "Putting the New Keynesian DSGE Model to the Real‐Time Forecasting Test," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44(7), pages 1301-1324, October.
    • Handle: RePEc:wly:jmoncb:v:44:y:2012:i:7:p:1301-1324
    DOI: 10.1111/j.1538-4616.2012.00533.x
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    More about this item

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications

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