Professional forecasters and the real-time forecasting performance of an estimated new keynesian model for the euro area

Frank Smets, Anders Warne and Raf Wouters

No 1571, Working Paper Series from European Central Bank

Abstract: This paper analyses the real-time forecasting performance of the New Keynesian DSGE model of Galí, Smets, and Wouters (2012) estimated on euro area data. It investigates to what extent forecasts of inflation, GDP growth and unemployment by professional forecasters improve the forecasting performance. We consider two approaches for conditioning on such information. Under the “noise” approach, the mean professional forecasts are assumed to be noisy indicators of the rational expectations forecasts implied by the DSGE model. Under the “news” approach, it is assumed that the forecasts reveal the presence of expected future structural shocks in line with those estimated over the past. The forecasts of the DSGE model are compared with those from a Bayesian VAR model and a random walk. JEL Classification: E24, E31, E32

Keywords: Bayesian methods; DSGE model; estimated New Keynesian model; macroeconomic forecasting; real-time data; survey data (search for similar items in EconPapers)
Date: 2013-08
New Economics Papers: this item is included in nep-cba, nep-dge, nep-ecm, nep-eec and nep-for
Note: 58657
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20131571

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