In this paper we review the methodology of forecasting with log-linearised DSGE models using Bayesian methods. We focus on the estimation of their predictive distributions, with special attention being paid to the mean and the covariance matrix of h-steps ahead forecasts. In the empirical analysis, we examine the forecasting performance of the New Area-Wide Model (NAWM) that has been designed f...

In this paper, we investigate the consequences of breaks in mean for the estimates of model parameters and the resulting inferences about the structure of the economy and policy implications. We explore the behavior of DSGE models that undergo occasional, but permanent shocks to the parameters that determine their steady state. We present a method for approximating the state space representatio...

This paper proposes a functional specification approach for dynamic stochastic general equilibrium (DSGE) models that explores the properties of the solution method used to approximate policy functions. In particular, the solution-driven specification takes the properties of the solution method directly into account when designing the structural model in order to deliver enhanced flexibility an...

This paper develops an estimated hybrid model that combines the micro-founded DSGE model with the flexibility of the theoretical VAR model. The model is estimated via the maximum likelihood technique based on quarterly data on real Gross National Product (GNP), consumption, investment and hours worked, for the South African economy, over the period of 1970:1 to 2000:4. Based on a recursive esti...

This paper evaluates the suitability of current DSGE models for monetary policy analysis from a Bayesian perspective, recognizing that these models may be useful even if they are misspecified along some dimensions, using the framework laid out in Faust and Gupta (2009). The paper argues that practical monetary policy analysis deals with determining how intended policy should be revised in light...

This paper considers tests of the effectiveness of a policy intervention, defined as a change in the parameters of a policy rule, in the context of a macroeconometric dynamic stochastic general equilibrium (DSGE) model. We consider two types of intervention, first the standard case of a parameter change that does not alter the steady state, and second one that does alter the steady state, e.g. ...