Gupta, Rangan2008-03-182008-03-182007-12Gupta, R 2007, 'Forecasting the South African economy with Gibbs sampled BVECMs', South African Journal of Economics, vol. 75, no. 4, pp. 631-643. [http://www.blackwellpublishing.com/journal.asp?ref=0038-2280&site=2]0038-228010.1111/j.1813-6982.2007.00141.xhttp://hdl.handle.net/2263/4736The paper uses the Gibbs sampling technique to estimate a heteroscedastic Bayesian Vector Error Correction Model (BVECM) of the South African economy for the period 1970:1-2000:4, and then forecasts GDP, consumption, investment, short and long term interest rates, and the CPI over the period of 2001:1 to 2005:4. We find that a tight prior produces relatively more accurate forecasts than a loose one. The out-of-sample-forecast accuracy resulting from the Gibbs sampled BVECM is compared with those generated from a Classical VECM and a homoscedastic BVECM. The homoscedastic BVECM is found to produce the most accurate out of sample forecasts.361287 bytesapplication/pdfenBlackwell. The definitive version is available at www.blackwell-synergy.com.Vector error correction model (VECM)Bayesian vector error correction model (BVECM)Forecast accuracyBVECM forecastsVECM forecastsGibbs samplingEconomic forecasting -- South Africa -- Econometric modelsSouth Africa -- Economic conditions -- Econometric modelsPostprint Article