E37 - Forecasting and Simulation: Models and Applications

• 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

• How Do Central Bank Projections and Forward Guidance Influence Private-Sector Forecasts?

  Staff Working Paper 2018-2 Monica Jain, Christopher S. Sutherland

  We construct a 23-country panel data set to consider the effect of central bank projections and forward guidance on private-sector forecast disagreement. We find that central bank projections and forward guidance matter mainly for private-sector forecast disagreement surrounding upcoming policy rate decisions and matter less for private-sector macroeconomic forecasts.

  Content Type(s): Staff Research, Staff Working Papers Topic(s): Central bank research, Inflation targets, Monetary Policy, Monetary policy communications, Transmission of monetary policy JEL Code(s): D, D8, D83, E, E3, E37, E5, E52, E58

• Evaluating Real GDP Growth Forecasts in the Bank of Canada Monetary Policy Report

  Staff Analytical Note 2017-21 André Binette, Dmitri Tchebotarev

  This paper examines the quality of projections of real GDP growth taken from the Bank of Canada Monetary Policy Report (MPR) since they were first published in 1997. Over the last decade, it has become common practice among the central banking community to discuss forecast performance publicly.

  Content Type(s): Staff Research, Staff Analytical Notes Topic(s): Business fluctuations and cycles, Econometric and statistical methods, Monetary Policy JEL Code(s): C, C5, C52, E, E3, E32, E37, E5, E52

• A Structural Interpretation of the Recent Weakness in Business Investment

  Staff Analytical Note 2017-7 Russell Barnett, Rhys R. Mendes

  Since 2012, business investment growth has slowed considerably in advanced economies, averaging a little less than 2 per cent versus the 4 per cent growth rates experienced in the period leading up to crisis. Several recent studies have attributed a large part of the weakness in business investment to cyclical factors, including soft aggregate demand, and, to a lesser degree, heightened uncertainty and tighter financial conditions.

  Content Type(s): Staff Research, Staff Analytical Notes Topic(s): Business fluctuations and cycles, Domestic demand and components, Recent economic and financial developments JEL Code(s): E, E2, E22, E3, E37