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Activity Number:
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86
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Type:
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Invited
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Date/Time:
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Monday, August 3, 2009 : 8:30 AM to 10:20 AM
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Sponsor:
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Business and Economic Statistics Section
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| Abstract - #302838 |
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Title:
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DSGE Model-Based Forecasting of Nonmodeled Variables
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Author(s):
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Frank Schorfheide*+ and Keith Sill
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Companies:
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University of Pennsylvania and Federal Reserve Bank of Philadelphia
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Address:
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Department of Economics, 3718 Locust Walk, Philadelphia, PA, 19104-6297,
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Keywords:
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Bayesian Analysis ; DSGE Models ; Forecasting
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Abstract:
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This paper develops and illustrates a simple method to generate DSGE model-based forecast for variables that do not explicitly appear in the model (non-core variables). We use auxiliary regressions that resemble measurement equations in a dynamic factor model to link the non-core variables to the state variables of the DSGE model. Predictions for the non-core variables are obtained by applying their measurement equations to DSGE model generated forecasts of the state variables. Using a medium-scale New Keynesian DSGE model, we apply our approach to generate recursive forecasts for PCE inflation, core-PCE inflation, and the unemployment rate.
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