• A
  • A
  • A
  • ABC
  • ABC
  • ABC
  • А
  • А
  • А
  • А
  • А
Regular version of the site

Article

FORECASTING USING A NONLINEAR DSGE MODEL

Ivashchenko S., Gupta R.

A medium-scale nonlinear dynamic stochastic general equilibrium (DSGE) model was estimated (54 variables, 29 state variables, 7 observed variables). The model includes an observed variable for stock market returns. The root-mean square error (RMSE) of the in-sample and out-of-sample forecasts was calculated. The nonlinear DSGE model with measurement errors outperforms AR (1), VAR (1) and the linearised DSGE in terms of the quality of the out-of-sample forecasts. The nonlinear DSGE model without measurement errors is of a quality equal to that of the linearised DSGE model.