Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
997488 | International Journal of Forecasting | 2015 | 19 Pages |
Abstract
This paper compares the quality of forecasts from DSGE models with and without financial frictions. We find that accounting for financial market imperfections does not result in a uniform improvement in the accuracy of point forecasts during non-crisis times, while the average quality of density forecast actually deteriorates. In contrast, adding frictions in the housing market proves very helpful during times of financial turmoil, outperforming both the frictionless benchmark and the alternative that incorporates financial frictions in the corporate sector. Moreover, we detect complementarities among the analyzed setups that can be exploited in the forecasting process.
Related Topics
Social Sciences and Humanities
Business, Management and Accounting
Business and International Management
Authors
Marcin Kolasa, Michał Rubaszek,