An Assessment of the FRBNY DSGE Model's Real-Time Forecasts, 2010-2013

Cocci, Matthew; Del Negro, Marco; Eusepi, Stefano; Giannoni, Marc; Linder, M. Henry; Shahanaghi, Sara

Discussion Paper

An Assessment of the FRBNY DSGE Model's Real-Time Forecasts, 2010-2013

Abstract: In this blog post, we discuss the real-time forecasts from the FRBNY DSGE model starting from March 2010, when we began producing policy forecasts, and provide an assessment of the model’s overall forecasting accuracy. The forecasts have been produced roughly eight times a year, about two weeks before each Federal Open Market Committee (FOMC) meeting, and have all been released in internal documents. Note that the FRBNY DSGE forecast is not the official FRBNY staff forecast and that the specification of the model has evolved over time, reflecting attempts to capture important features of the economy more precisely as well as researchers’ progress in modeling. For instance, in 2011 we introduced financial frictions, which play a crucial role in explaining the Great Recession and shaping the current forecast. In addition, we use market-based observations of the expected future federal funds rate to capture the changing nature of the forward guidance provided by the FOMC.

Keywords: Forecasting; DSGE models;

JEL Classification: E2; E5;