model has historically generated reasonably accurate forecasts at short horizons and much less accurate forecasts at longer horizons, based on the typical forecast misses--technically, the root mean squared forecast errors--from this model.
Eight quarters ahead, two forecasts (from the BVAR
models) predict PCE inflation will be between 2 and 2V2 percent, while two forecasts (from the SS-SV and TVP-SV models) predict PCE inflation will be between 1 1/2 and 2 percent.
In this study, factors affecting firm performance are studied on the basis of MTM using both VAR and BVAR
models via impulse response functions (IRFs) providing evidence from the manufacturing sector of Turkey.
The recursive BVAR
models are also estimated in Dynare, which utilizes Chris Sims' BVAR
codes for Matlab based on the dummy observation method of imposing Bayesian priors.
We would like to thank Marta Banbura for providing us with the codes used in estimating the large-scale BVAR
and her assistance with its implementation.
In line with the results in the DSGE model forecasting literature, we found that the root mean squared errors (RMSEs) of the DSGE model forecasts were similar to, and often better than, those of the BVAR
and Greenbook forecasts.
In the next section, we present two estimated BVAR
Ramos (1995) describes VAR and BVAR
modelling in its general context and presents this methodology comprehensively.
We run three variants of our BVAR
including wages--one variant using Ed, one using AHE, and one using CPH--and then run a final variant that excludes any wage measure.
In addition to a quantitative comparison of BVAR
and Bloomberg consensus forecast, the paper focuses on five important areas of macroeconomic forecasting: the role of short-term macroeconomic forecasting, the importance of a robust forecasting approach, the importance of timing of data releases, forecast evaluation criteria, and the importance of changing model specifications as conditions warrant.
model is often used in the empirical literature as a benchmark for model comparison (Robertson and Talhnan 1999, 2001), and reporting tire real-time forecasting performance of this model is of particular interest to academic researchers.
Hence, we introduce the results for systems of VAR and BVAR
where either USA or lagged USA is presented in the following discussion.