Dealing with financial instability under a DSGE modeling approach with banking intermediation: A predictability analysis versus TVP-VARs

Arbeitspapier

In the dynamic stochastic general equilibrium (DSGE) literature there has been an increasing aware- ness on the role that the banking sector can play in macroeconomic activity. We present a DSGE model with financial intermediation as in Gertler and Karadi (2011). The estimation of shocks and of the structural parameters shows that time-variation should be crucial in any attempted empirical analysis. Since DSGE modelling usually fails to take into account inherent nonlinearities of the economy, we propose a novel time-varying parameter (TVP) state-space estimation method for VAR processes both for homoskedastic and heteroskedastic error structures. We conduct an exhaustive empirical exercise to compare the out-of-sample predictive performance of the estimated DSGE model with that of standard ARs, VARs, Bayesian VARs and TVP-VARs. We find that the TVP-VAR provides the best forecasting performance for the series of GDP and net worth of financial intermediaries for all steps-ahead, while the DSGE model outperforms the other specifications in forecasting inflation and the federal funds rate at shorter horizons.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: UCD Centre for Economic Research Working Paper Series ; No. WP16/11

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Bayesian Analysis: General ; Estimation: General ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Prices, Business Fluctuations, and Cycles: Forecasting and Simulation: Models and Applications
• Thema: Financial frictions ; DSGE ; Time-varying coefficients ; Extended Kalman filter ; Banking sector

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Bekiros, Stelios ; Cardani, Roberta ; Paccagnini, Alessia ; Villa, Stefania
• Ereignis: Veröffentlichung
• (wer): University College Dublin, UCD School of Economics
• (wo): Dublin
• (wann): 2016

Weitere Informationen

• Handle: http://hdl.handle.net/10419/175470
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ