Canadian Policy Analysis Model: CPAM

This paper documents the structure and properties of the Canadian Policy Analysis Model (CPAM). CPAM is designed to provide a reasonably complete representation of the Canadian macro economy. It is a one-domestic-good, small-open-economy model, which features an endogenous supply side, behavioural equations for the principal components of demand, forward-looking expectations, and reaction functions for both the monetary and fiscal authorities. The model has an explicit steady state and is dynamically stable over a wide range of disturbances. CPAM is similar in many ways to the Bank of Canada's Quarterly Projection Model (QPM), and it has been calibrated to reflect QPM's dynamic properties in deterministic simulations. CPAM is smaller, however, and has been configured to simulate much faster than QPM so that stochastic simulations on a large scale are feasible.