Smets and Wouters model estimated with skewed shocks - empirical study of forecasting properties?

• Autorzy: Grzegorz Koloch
• Języki publikacji: EN

Abstrakty

EN

In this paper we estimate a Smets and Wouters (2007) model with shocks following a closed skew normal distribution (csn), which was introduced by Gonzalez- Farias et al. (2004) and which nests a normal distribution as a special case. In the paper we present the identification procedure, discuss priors for model parameters, including skewness-related parameters of shocks, i.e. location, scale and skewness parameters. Using data ranging from 1990Q1 to 2012Q2 we estimate the model and recursively verify its out-of sample forecasting properties for time period 2007Q1 - 2012Q2, therefore including the recent financial crisis, within a forecasting horizon from 1 up to 8 quarters ahead. Using a RMSE measure we compare the forecasting performance of the model with skewed shocks with a model estimated using normally distributed shocks. We find that inclusion of skewness can help forecasting some variables (consumption, investment and hours worked), but, on the other hand, results in deterioration in the others (output, ination, wages and the short rate). (original abstract)

Słowa kluczowe

EN

Dynamic Stochastic General Equilibrium (DSGE); Forecasting

PL

Model dynamicznej stochastycznej równowagi ogólnej; Prognozowanie

• Czasopismo: Collegium of Economic Analysis SGH - Working Papers
• Rocznik: 2016
• Numer: nr 23
• Strony: 34

Twórcy

autor

Grzegorz Koloch

• Warsaw School of Economics, Poland

Bibliografia

• Genz, A., Bretz, F. (2009) Computation of Multivariate Normal and t Probabilities., Springer.
• Genton, M.G. (ed.) (2004) Skew-elliptical distributions and their applications. A journey beyond normality, A CRC Press Company (2004).
• González-Farías, G., Domínguez-Molina, J., Gupta, A. (2004) Additive properties of skew normal random vectors, "Journal of Statistical Planning and Inference", Vol. 126, pp. 521-534.
• Smets, F., Wouters, R., (2007) Shocks and frictions in US business cycles. A Bayesian approach., ECB Working Paper Series No 722 (2007).