Balcilar, MehmetGupta, RanganKotze, Kevin2017-08-182017-08Balcilar, M., Gupta, R. & Kotze, K. 2017, 'Forecasting South African macroeconomic variables with a Markov-switching small open-economy dynamic stochastic general equilibrium model', Empirical Economics, vol. 53, no. 1, pp. 117-135.0377-7332 (print)1435-8921 (online)10.1007/s00181-016-1157-6http://hdl.handle.net/2263/61724This paper seeks to identify evidence of regime-switching behaviour in the monetary policy response function and the variance of the shocks. It makes use of various specifications of a small open-economy Markov-switching dynamic stochastic general equilibrium model that is applied to South African data from 1989 to 2014. While the in-sample statistics suggest that some of the regime-switching models may provide superior results, the out-of-sample statistics suggest that the inclusion of various forms of regime-switching does not significantly improve upon the forecasting performance of the model. The results also suggest that the central bank response function has been consistently applied over the sample period.en© Springer-Verlag Berlin Heidelberg 2016. The original publication is available at http://link.springer.comjournal/181.Monetary policyInflation targetingMarkov-switchingDynamic stochastic general equilibrium (DSGE) modelBayesian estimationSmall open-economyPostprint Article