We compare real-time density forecasts for the euro area using three DSGE models. The benchmark is the Smets-Wouters model and its forecasts of real GDP growth and inflation are compared with those from two extensions. The first adds financial frictions and expands the observables to include a...

This paper compares within-sample and out-of-sample fit of a DSGE model with rational expectations to a model with adaptive learning. The Galí, Smets and Wouters model is the chosen laboratory using quarterly real-time euro area data vintages, covering 2001Q1-2019Q4. The adaptive learning model...

We develop a time-varying transition probabilities Markov Switching model in which inflation is characterised by two regimes (high and low inflation). Using Bayesian techniques, we apply the model to the euro area, Germany, the US, the UK and Canada for data from the 1960s up to the present. Our...

Interactions between the eurozone and US booms and busts and among major eurozone economies are analyzed by introducing a panel Markov-switching VAR model well suitable for a multi-country cyclical analysis. The model accommodates changes in low and high data frequencies and endogenous...

This paper describes an algorithm to compute the distribution of conditional forecasts, i.e. projections of a set of variables of interest on future paths of some other variables, in dynamic systems. The algorithm is based on Kalman filtering methods and is computationally viable for large...

Recent articles suggest that a Bayesian vector autoregression (BVAR) with shrinkage is a good forecast device even when the number of variables is large. In this paper we evaluate different variants of the BVAR with respect to their forecast accuracy for euro area real GDP growth and HICP...

Interactions between the eurozone and US booms and busts and among major eurozone economies are analyzed by introducing a panel Markov-switching VAR model well suitable for a multi-country cyclical analysis. The model accommodates changes in low and high data frequencies and endogenous...

This paper uses forecasts from the European Central Bank's Survey of Professional Forecasters to investigate the relationship between inflation and inflation expectations in the euro area. We use theoretical structures based on the New Keynesian and Neoclassical Phillips curves to inform our...

We develop a time-varying transition probabilities Markov Switching model in which inflation is characterised by two regimes (high and low inflation). Using Bayesian techniques, we apply the model to the euro area, Germany, the US, the UK and Canada for data from the 1960s up to the present. Our...

Recent articles suggest that a Bayesian vector autoregression (BVAR) with shrinkage is a good forecast device even when the number of variables is large. In this paper we evaluate different variants of the BVAR with respect to their forecast accuracy for euro area real GDP growth and HICP...