A Forecasting Metric for Evaluating DSGE Models for Policy Analysis

MPRA Paper from University Library of Munich, Germany

Abstract: This paper evaluates the strengths and weaknesses of dynamic stochastic general equilibrium (DSGE) models from the standpoint of their usefulness in doing monetary policy analysis. The paper isolates features most relevant for monetary policymaking and uses the diagnostic tools of posterior predictive analysis to evaluate these features. The paper provides a diagnosis of the observed flaws in the model with regards to these features that helps in identifying the structural flaws in the model. The paper finds that model misspecification causes certain pairs of structural shocks in the model to be correlated in order to fit the observed data.

Keywords: Posterior predictive analysis; DSGE; Monetary Policy; Forecast Errors; Model Evaluation. (search for similar items in EconPapers)
JEL-codes: C11 C52 E1 E58 (search for similar items in EconPapers)
Date: 2010-10-30
New Economics Papers: this item is included in nep-cba, nep-dge, nep-for, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6) Track citations by RSS feed

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/26718/1/MPRA_paper_26718.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:26718

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().