FORECASTING WITH DSGE MODELS

Working PaP er SerieSno 1185 / May 2010ForecaSting With DSge MoDelSBy Kai Christoffel, Günter Coenen and Anders WarneWORKING PAPER SERIESNO 1185 / MAY 2010 1FORECASTING WITH DSGE MODELSby Kai Christoffel, Günter Coenen, 2and Anders WarneNOTE: This Working Paper should not be reported as representing the views of the European Central Bank (ECB). The views expressed are those of the authors and do not necessarily reflect those of the ECB.In 2010 all ECB publications feature a motif taken from the €500 banknote.This paper can be downloaded without charge from http://www.ecb.europa.eu or from the Social Science Research Network electronic library at http://ssrn.com/abstract_id=1593643.1 The paper is in preparation for appearing as a chapter in an ‘Oxford Handbook’ on Economic Forecasting, edited by Michael P. Clements and David F. Hendry. We have received valuable comments and suggestions by the editors and an anonymous referee of the Handbook chapter. We are particularly grateful to Marta Bańbura who has estimated and computed the forecasts for the two large Bayesian VAR models we have used in the paper. We have received valuable comments from participants at the 2009 Nottingham workshop on DSGE modelling, seminar participants at the Humboldt University in Berlin, December 2009, and participants in the meeting of the Ökonometrie-Ausschuss des Vereins für Socialpolitik in Rauischholzhausen, March 2010. We are very grateful for discussions ...