Master of Science in Economics
Department of Economics
Date of Award
Ehsan U. Choudhri
Dr. Adnan Haider
Committee Member 1
Ehsan U. Choudhri, Institute of Business Administration, Karachi
Committee Member 2
Dr. Adnan Haider, Institute of Business Administration, Karachi
Macroeconomics, Economic policy
This study estimates a DSGE model and three versions of VAR models to analyze forecast performance of these models in context of Pakistan. Three versions of VAR models (VARX. BVARX and BVAR) and, a variant of Adolfson. Laséen. Lindé, and Villani (2007) DSGE model have been estimated using quarterly data (1980Q4-2016Q2). Expanding window recursive out-of-sample forecasts for GDP growth, call money rate, CPI inflation and change in exchange rate are generated and compared over the period 2009Q1-2016Q2. Forecasting performance is analyzed by the comparison of bias and root mean squared errors (RMSE). Comparison of forecasting performance shows that, VAR models provide better forecasts than estimated DSGE model. However, in case of GDP growth, interest rate and inflation, forecasting performance of estimated DSGE model appears to be quite close to VAR models. Forecasts from all models are positively correlated, detiorate in turbulant times and improve in relatively calm periods.
Ahmed, S. (2017). Comparison of forecasting performance of DSGE and VAR Models : the case of Pakistan (Unpublished master's thesis). Institute of Business Administration, Pakistan. Retrieved from https://ir.iba.edu.pk/etd/33
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