A medium-scale nonlinear DSGE model is estimated (54 variables, 29 state variables, 7 observed variables). The model includes stock market. RMSE of in sample and out of sample forecasts are calculated. The nonlinear DSGE model with measurement errors outperform AR(1), VAR(1), linearized DSGE in...

New simple forms of deviation from rational expectations (RE) are suggested: temporary near-rational expectations (TNRE) and persistent near-rational expectations (PNRE). The medium-scale DSGE model was estimated with the RE, the TNRE and the PNRE. It was estimated with and without observations...

Recent research shows that time-varying volatility plays a crucial role in nonlinear modeling. Contributing to this literature, we suggest a DSGE-GARCH approach that allows for straightforward computation of DSGE models with time-varying volatility, where the volatility component is formulated...