Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154004
Authors: 
Smets, Frank
Warne, Anders
Wouters, Raf
Year of Publication: 
2013
Series/Report no.: 
ECB Working Paper 1571
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.
Subjects: 
Bayesian methods
DSGE model
estimated New Keynesian model
macroeconomic forecasting
real-time data
survey data
JEL: 
E24
E31
E32
Document Type: 
Working Paper

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