E37 - Forecasting and Simulation: Models and Applications

• Modelling the Macrofinancial Effects of a House Price Correction in Canada

  Staff Analytical Note 2018-36 Thibaut Duprey, Xuezhi Liu, Cameron MacDonald, Maarten van Oordt, Sofia Priazhkina, Xiangjin Shen, Joshua Slive

  We use a suite of risk-assessment models to examine the possible impact of a hypothetical house price correction, centred in the Toronto and Vancouver areas. We also assume financial stress significantly amplifies the macroeconomic impact of the house price decline.

  Content Type(s): Staff Research, Staff Analytical Notes Topic(s): Financial Institutions, Financial stability, Housing JEL Code(s): E, E2, E27, E3, E37, E4, E44, G, G2, G21

• The Framework for Risk Identification and Assessment

  Technical Report No. 113 Cameron MacDonald, Virginie Traclet

  Risk assessment models are an important component of the Bank’s analytical tool kit for assessing the resilience of the financial system. We describe the Framework for Risk Identification and Assessment (FRIDA), a suite of models developed at the Bank of Canada to quantify the impact of financial stability risks to the broader economy and a range of financial system participants (households, businesses and banks).

  Content Type(s): Technical Reports Topic(s): Economic models, Financial Institutions, Financial stability, Housing JEL Code(s): C, C3, C5, C6, C7, D, D1, E, E0, E00, E2, E27, E3, E37, E4, E47, G, G0, G2, G21

• Evaluating the Bank of Canada Staff Economic Projections Using a New Database of Real-Time Data and Forecasts

  Staff Working Paper 2018-52 Julien Champagne, Guillaume Poulin-Bellisle, Rodrigo Sekkel

  We present a novel database of real-time data and forecasts from the Bank of Canada’s staff economic projections. We then provide a forecast evaluation for GDP growth and CPI inflation since 1982: we compare the staff forecasts with those from commonly used time-series models estimated with real-time data and with forecasts from other professional forecasters and provide standard bias tests.

  Content Type(s): Staff Research, Staff Working Papers Topic(s): Econometric and statistical methods, Economic models, Inflation targets, Monetary Policy JEL Code(s): C, C3, C32, E, E1, E17, E3, E37

• Sluggish Forecasts

  Staff Working Paper 2018-39 Monica Jain

  Given the influence that agents’ expectations have on key macroeconomic variables, it is surprising that very few papers have tried to extrapolate agents’ “true” expectations directly from the data. This paper presents one such approach, starting with the hypothesis that there is sluggishness in inflation and real GDP growth forecasts.

  Content Type(s): Staff Research, Staff Working Papers Topic(s): Econometric and statistical methods, Inflation and prices JEL Code(s): E, E3, E31, E37

• Nowcasting Canadian Economic Activity in an Uncertain Environment

  Staff Discussion Paper 2018-9 Tony Chernis, Rodrigo Sekkel

  This paper studies short-term forecasting of Canadian real GDP and its expenditure components using combinations of nowcasts from different models. Starting with a medium-sized data set, we use a suite of common nowcasting tools for quarterly real GDP and its expenditure components.

  Content Type(s): Staff Research, Staff Discussion Papers Topic(s): Econometric and statistical methods JEL Code(s): C, C5, C53, E, E3, E37, E5, E52

• On the Evolution of the United Kingdom Price Distributions

  Staff Working Paper 2018-25 Ba M. Chu, Kim Huynh, David T. Jacho-Chávez, Oleksiy Kryvtsov

  We propose a functional principal components method that accounts for stratified random sample weighting and time dependence in the observations to understand the evolution of distributions of monthly micro-level consumer prices for the United Kingdom (UK).

  Content Type(s): Staff Research, Staff Working Papers Topic(s): Econometric and statistical methods, Inflation and prices JEL Code(s): C, C1, C14, C8, C83, E, E3, E31, E37

• Potential Output in Canada: 2018 Reassessment

  Staff Analytical Note 2018-10 Andrew Agopsowicz, Dany Brouillette, Bassirou Gueye, Julien McDonald-Guimond, Jeffrey Mollins, Youngmin Park

  This note summarizes the reassessment of potential output, conducted by the Bank of Canada for the April 2018 Monetary Policy Report. Overall, the profile for potential output growth is expected to remain flat at 1.8 per cent between 2018 and 2020 and 1.9 per cent in 2021.

  Content Type(s): Staff Research, Staff Analytical Notes Topic(s): Labour markets, Potential output, Productivity JEL Code(s): E, E0, E00, E2, E22, E23, E24, E3, E37, E6

• Could a Higher Inflation Target Enhance Macroeconomic Stability?

  Staff Working Paper 2018-17 José Dorich, Nicholas Labelle, Vadym Lepetyuk, Rhys R. Mendes

  Recent international experience with the effective lower bound on nominal interest rates has rekindled interest in the benefits of inflation targets above 2 per cent. We evaluate whether an increase in the inflation target to 3 or 4 per cent could improve macroeconomic stability in the Canadian economy.

  Content Type(s): Staff Research, Staff Working Papers Topic(s): Economic models, Inflation targets, Monetary policy framework JEL Code(s): E, E3, E32, E37, E4, E43, E5, E52

• Asymmetric Risks to the Economic Outlook Arising from Financial System Vulnerabilities

  Staff Analytical Note 2018-6 Thibaut Duprey

  When financial system vulnerabilities are elevated, they can give rise to asymmetric risks to the economic outlook. To illustrate this, I consider the economic outlook presented in the Bank of Canada’s October 2017 Monetary Policy Report in the context of two key financial system vulnerabilities: high levels of household indebtedness and housing market imbalances.

  Content Type(s): Staff Research, Staff Analytical Notes Topic(s): Business fluctuations and cycles, Econometric and statistical methods, Financial stability, Financial system regulation and policies, Monetary and financial indicators, Recent economic and financial developments, Uncertainty and monetary policy JEL Code(s): C, C0, C01, C1, C11, C15, E, E1, E17, E3, E32, E37, E4, E44, E47, E5, E58, E6, E66, G, G0, G01, G1, G18

• Dismiss the Gap? A Real-Time Assessment of the Usefulness of Canadian Output Gaps in Forecasting Inflation

  Staff Working Paper 2018-10 Lise Pichette, Marie-Noëlle Robitaille, Mohanad Salameh, Pierre St-Amant

  We use a new real-time database for Canada to study various output gap measures. This includes recently developed measures based on models incorporating many variables as inputs (and therefore requiring real-time data for many variables).

  Content Type(s): Staff Research, Staff Working Papers Topic(s): Econometric and statistical methods, Inflation and prices, Potential output JEL Code(s): C, C5, C53, E, E3, E37