C - Mathematical and Quantitative Methods

• Does Inflation Uncertainty Vary with the Level of Inflation?

  Staff Working Paper 1996-9 Allan Crawford, Marcel Kasumovich

  The purpose of this study is to test the hypothesis that inflation uncertainty increases at higher levels of inflation. Our analysis is based on the generalized autoregressive conditional heteroscedasticity (GARCH) class of models, which allow the conditional variance of the error term to be time-varying. Since this variance is a proxy for inflation uncertainty, a positive relationship between the conditional variance and inflation would be interpreted as evidence that inflation uncertainty increases with the level of inflation.

  Content Type(s): Staff research, Staff working papers Topic(s): Inflation and prices, Monetary policy and uncertainty JEL Code(s): C, C5, C52, E, E3, E31

• Excess Volatility and Speculative Bubbles in the Canadian Dollar: Real or Imagined?

  Technical Report No. 76 John Murray, Simon van Norden, Robert Vigfusson

  Greater intervention by the public sector is often proposed as a solution to the increased speculation and excessive price volatility thought to characterize today's competitive world financial system.

  Content Type(s): Staff research, Technical reports Topic(s): Exchange rates JEL Code(s): C, C4, C40, F, F3, F31

• The Bank of Canada's New Quarterly Projection Model, Part 3. The Dynamic Model: QPM

  Technical Report No. 75 Donald Coletti, Benjamin Hunt, David Rose, Robert Tetlow

  The Bank of Canada's new Quarterly Projection Model, QPM, combines the short-term dynamic properties necessary to support regular economic projections with the consistent behavioural structure necessary for policy analysis.

  Content Type(s): Staff research, Technical reports Topic(s): Economic models JEL Code(s): C, C5, C53, E, E1, E17

• Regime-Switching Models: A Guide to the Bank of Canada Gauss Procedures

  Staff Working Paper 1996-3 Simon van Norden, Robert Vigfusson

  This paper is a user's guide to a set of Gauss procedures developed at the Bank of Canada for estimating regime-switching models.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods JEL Code(s): C, C6, C63

• Switching Between Chartists and Fundamentalists: A Markov Regime-Switching Approach

  Staff Working Paper 1996-1 Robert Vigfusson

  Since the early 1980s, models based on economic fundamentals have been poor at explaining the movements in the exchange rate (Messe 1990). In response to this problem, Frankel and Froot (1988) developed a model that uses two approaches to forecast the exchange rate: the fundamentalist approach, which bases the forecast on economic fundamentals, and the chartist approach, which bases the forecast on the past behaviour of the exchange rate.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial markets JEL Code(s): C, C4, C40, G, G1, G12

• The Bank of Canada's New Quarterly Projection Model, Part 2. A Robust Method for Simulating Forward-Looking Models

  Technical Report No. 73 John Armstrong, Richard Black, Douglas Laxton, David Rose

  In this report, we describe methods for solving economic models when expectations are presumed to have at least some element of consistency with the predictions of the model itself. We present analytical results that establish the convergence properties of alternative solution procedures for linear models with unique solutions. Only one method is guaranteed to converge, […]

  Content Type(s): Staff research, Technical reports Topic(s): Economic models JEL Code(s): C, C3, C32, C5, C53

• The Bank of Canada's New Quarterly Projection Model, Part 1. The Steady-State Model: SSQPM

  Technical Report No. 72 Richard Black, Douglas Laxton, David Rose, Robert Tetlow

  This report is the first documenting the Bank of Canada's new model of the Canadian economy, the Quarterly Projection Model (QPM). QPM is used at the Bank of Canada for both economic projections and policy analysis. Here the authors focus on the model's long-run properties, describing SSQPM, a model of the steady state of QPM […]

  Content Type(s): Staff research, Technical reports Topic(s): Economic models JEL Code(s): C, C5, C51, E, E1, E13

• Optimum Currency Areas and Shock Asymmetry: A Comparison of Europe and the United States

  Staff Working Paper 1994-1 Nick Chamie, Alain DeSerres, René Lalonde

  Since the early 1980s, models based on economic fundamentals have been poor at explaining the movements in the exchange rate (Messe 1990). In response to this problem, Frankel and Froot (1988) developed a model that uses two approaches to forecast the exchange rate: the fundamentalist approach, which bases the forecast on economic fundamentals, and the chartist approach, which bases the forecast on the past behaviour of the exchange rate.

  Content Type(s): Staff research, Staff working papers Topic(s): Exchange rates, Financial markets JEL Code(s): C, C4, C40, G, G1, G12

• A Simple Multivariate Filter for the Measurement of Potential Output

  Technical Report No. 59 Douglas Laxton, Robert Tetlow

  This paper examines techniques that have been used to estimate potential output and finds them wanting. We suggest a simple multivariate-filtering technique that is a generalization of the Hodrick-Prescott univariate filter. In univariate filters, only information about a variable itself is used in eliminating noise in order to obtain an estimate of the underlying trend. […]

  Content Type(s): Staff research, Technical reports Topic(s): Potential output JEL Code(s): C, C1, C15, E, E2

• Government Debt in an Open Economy

  Technical Report No. 58 Douglas Laxton, Robert Tetlow

  This paper introduces the CORE model, a prototype for a new quarterly model of the Canadian economy, designed for projections and policy analysis with focus beyond the very short run. The model has a clearly defined equilibrium and explicit adjustment mechanisms, primarily through relative prices, that are dynamically stable. Overlaid on a neo-classical growth model […]

  Content Type(s): Staff research, Technical reports Topic(s): Fiscal policy JEL Code(s): C, C5, C53, F, F3, F32, H, H3, H30, H6, H60