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Model-based Vs. Professional Forecasts: Implications for Models with Nominal Rigidities

DSGE models

  • Model-based Vs. Professional Forecasts: Implications for Models with Nominal Rigidities

    We compare model forecast error statistics with forecast error statistics of professional forecasts. We look at a standard sticky-prices–wages model, concluding that it delivers too strong a theoretical forecastability of the variables under scrutiny, at odds with the data (professional forecasts).