Bank of Canada Review - Summer 2013

August 15, 2013
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This special issue discusses tools used at Bank of Canada to conduct current analysis - the collection and analysis of a broad spectrum of information to form a view of current economic activity. This analysis is a key input into the Bank’s monetary policy decision-making process.

The Bank of Canada Review is published four times a year. Articles undergo a thorough review process. The views expressed in the articles are those of the authors and do not necessarily reflect the views of the Bank.

The contents of the Review may be reproduced or quoted, provided that the publication, with its date, is specifically cited as the source.
Content Type(s): Publications, Bank of Canada Review
August 15, 2013

CSI: A Model for Tracking Short-Term Growth in Canadian Real GDP

Bank of Canada Review - Summer 2013 André Binette, Jae Chang
Canada’s Short-Term Indicator (CSI) is a new model that exploits the information content of 32 indicators to produce daily updates to forecasts of quarterly real GDP growth. The model is a data-intensive, judgment-free approach to short-term forecasting. While CSI’s forecasts at the start of the quarter are not very accurate, the model’s accuracy increases appreciably as more information becomes available. CSI is the latest addition to a wide range of models and information sources that the Bank of Canada uses, combined with expert judgment, to produce its short-term forecasts.
Content Type(s): Publications, Bank of Canada Review articles Topic(s): Econometric and statistical methods JEL Code(s): C, C5, C53, E, E1, E17, E3, E37
August 15, 2013

The Accuracy of Short-Term Forecast Combinations

Bank of Canada Review - Summer 2013 Eleonora Granziera, Corinne Luu, Pierre St-Amant
This article examines whether combining forecasts of real GDP from different models can improve forecast accuracy and considers which model-combination methods provide the best performance. In line with previous literature, the authors find that combining forecasts generally improves forecast accuracy relative to various benchmarks. Unlike several previous studies, however, they find that, rather than assigning equal weights to each model, unequal weighting based on the past forecast performance of models tends to improve accuracy when forecasts across models are substantially different.
Content Type(s): Publications, Bank of Canada Review articles Topic(s): Econometric and statistical methods JEL Code(s): C, C5, C52, C53, E, E3, E37
August 15, 2013

Monitoring Short-Term Economic Developments in Foreign Economies

Bank of Canada Review - Summer 2013 Russell Barnett, Pierre Guérin
The Bank of Canada uses several short-term forecasting models for the monitoring of key foreign economies - the United States, the euro area, Japan and China. The design of the forecasting models used for each region is influenced by the level of detail required, as well as the timeliness and volatility of data. Forecasts from different models are typically combined to mitigate model uncertainty, and judgment is applied to the model forecasts to incorporate information that is not directly reflected in the most recent indicators.
Content Type(s): Publications, Bank of Canada Review articles Topic(s): Business fluctuations and cycles JEL Code(s): E, E3, E37
August 15, 2013

Big Data Analysis: The Next Frontier

Bank of Canada Review - Summer 2013 Nii Ayi Armah
The formulation of monetary policy at the Bank of Canada relies on the analysis of a broad set of economic information. Greater availability of immediate and detailed information would improve real-time economic decision making. Technological advances have provided an opportunity to exploit “big data” - the vast amount of digital data from business transactions, social media and networked computers. Big data can be a complement to traditional information sources, offering fresh insight for the monitoring of economic activity and inflation.
Content Type(s): Publications, Bank of Canada Review articles Topic(s): Econometric and statistical methods, Monetary and financial indicators JEL Code(s): C, C5, C53, C6, C63, C8, C80