Link to the University of Pittsburgh Homepage
Link to the University Library System Homepage Link to the Contact Us Form

Balanced Growth Approach to Tracking Recessions

Boczoń, Marta and Richard, Jean-François (2020) Balanced Growth Approach to Tracking Recessions. Econometrics, 8 (2). p. 14. ISSN 2225-1146

Published Version

Download (1MB) | Preview


In this paper, we propose a hybrid version of Dynamic Stochastic General Equilibrium models with an emphasis on parameter invariance and tracking performance at times of rapid changes (recessions). We interpret hypothetical balanced growth ratios as moving targets for economic agents that rely upon an Error Correction Mechanism to adjust to changes in target ratios driven by an underlying state Vector AutoRegressive process. Our proposal is illustrated by an application to a pilot Real Business Cycle model for the US economy from 1948 to 2019. An extensive recursive validation exercise over the last 35 years, covering 3 recessions, is used to highlight its parameters invariance, tracking and 1- to 3-step ahead forecasting performance, outperforming those of an unconstrained benchmark Vector AutoRegressive model.


Social Networking:
Share |


Item Type: Article
Status: Published
CreatorsEmailPitt UsernameORCID
Boczoń, Marta
Richard, Jean-Françoisfantin@pitt.edufantin
Date: 23 April 2020
Date Type: Publication
Journal or Publication Title: Econometrics
Volume: 8
Number: 2
Publisher: MDPI AG
Page Range: p. 14
DOI or Unique Handle: 10.3390/econometrics8020014
Schools and Programs: Dietrich School of Arts and Sciences > Economics
Refereed: Yes
Uncontrolled Keywords: hybrid model, VAR, DSGE, ECM, RBC
ISSN: 2225-1146
Official URL:
Funders: National Science Foundation
Article Type: Research Article
Date Deposited: 21 Jul 2021 20:05
Last Modified: 21 Jul 2021 20:05


Monthly Views for the past 3 years

Plum Analytics

Actions (login required)

View Item View Item