Lorenzo Burlon

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"Medium-Term Conditional Forecasting of Euro-Area Macroeconomic Variables with DSGE and BVARX models"


Joint with Simone Emiliozzi, Alessandro Notarpietro, and Massimiliano Pisani.


First version: January 2015.


Abstract The paper assesses the performance of medium-term forecasts of euro-area GDP and inflation obtained with a DSGE model and a BVARX model currently in use at the Bank of Italy. The performance is compared with that of simple univariate models and with the Eurosystem projections; the same real time assumptions underlying the latter are used to condition the DSGE and the BVARX forecasts. We find that the performance of both forecasts is similar to that of Eurosystem forecasts and overall more accurate than that of simple autoregressive models. The DSGE model shows a relatively better performance in forecasting inflation, while the BVARX model fares better in forecasting GDP.

Keywords: Conditional forecasting, DSGE, BVARX, Euro area.

JEL classifications: C53, E32, E37.


Working paper versions:

Occasional papers of the Bank of Italy (Questioni di Economia e Finanza), n. 257, 2015.


Presented:

- II IAAE Annual Conference, Thessaloniki, June 2015 (Alessandro Notarpietro).
- EABCN-Norges Bank Conference on "Econometric methods for business cycle analysis, forecasting and policy simulations," Oslo, June 2015 (Simone Emiliozzi).