Diebold, Francis X.; Schorfheide, Frank; Shin, Minchul - 2017 - This Version: August 18, 2016
that background, we explore whether incorporating stochastic volatility improves DSGE forecasts (point, interval, and … policy rate. We find that incorporating stochastic volatility in DSGE models of macroeconomic fundamentals markedly improves … their density forecasts, just as incorporating stochastic volatility in models of financial asset returns improves their …
