BVAR models outperform DSGE in forecasting Australian economy, boosting accuracy.
The researchers built a model to predict how well the Australian economy will do, focusing on commodities. They compared two types of models and found that one type, called BVAR, was better at forecasting than the other type, DSGE. However, the BVAR didn't beat other common models for predicting economic growth. For predicting inflation in the short term, a different model called Bayesian factor augmented vector autoregression was the most accurate.