Indeterminacy and Forecastability
Recent studies document the deteriorating performance of forecasting models during the Great Moderation, which conversely implies that forecastability was higher in the preceding era when the economy was unexpectedly volatile. We explain this phenomenon in the context of equilibrium indeterminacy in dynamic stochastic general equilibrium (DSGE) models. We first analytically show that a model under indeterminacy exhibits richer dynamics that can improve forecastability. Then, using a...[Show more]
|Collections||ANU Research Publications|
|Source:||Journal of Money, Credit and Banking|
|01_Fujiwara_Indeterminacy_and_2014.pdf||66.45 kB||Adobe PDF||Request a copy|
Items in Open Research are protected by copyright, with all rights reserved, unless otherwise indicated.