Estimated DGE Models and Forecasting Accuracy: A Preliminary Investigation with Canadian Data

Kevin Moran & Veronika Dolar
This paper applies the hybrid dynamic general-equilibrium, vector autoregressive (DGE-VAR) model developed by Ireland (1999) to Canadian time series. It presents the first Canadian evidence that a hybrid DGE-VAR model may have better out-of-sample forecasting accuracy than a simple, structure-free VAR model. The evidence suggests that estimated DGE models have the potential to add good forecasting ability to their natural strength of adding structure to an economic model.
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