Semi-Structural Models for Inflation Forecasting Staff Working Paper 2010-34 Maral Kichian, Rumler Fabio, Paul Corrigan We propose alternative single-equation semi-structural models for forecasting inflation in Canada, whereby structural New Keynesian models are combined with time-series features in the data. Several marginal cost measures are used, including one that in addition to unit labour cost also integrates relative price shocks known to play an important role in open-economies. Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Inflation and prices JEL Code(s): C, C1, C13, C5, C53, E, E3, E31
Identifying Asymmetric Comovements of International Stock Market Returns Staff Working Paper 2010-21 Fuchun Li Based on a new approach for measuring the comovements between stock market returns, we provide a nonparametric test for asymmetric comovements in the sense that stock market downturns will lead to stronger comovements than market upturns. Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Financial stability, Financial system regulation and policies, International topics JEL Code(s): C, C4, C49, F, F2, F21, G, G1, G15, G19
June 9, 2010 Crude Oil Futures: A Crystal Ball? Bank of Canada Review - Spring 2010 Ron Alquist, Elif Arbatli Based on recent research, this article discusses three ways that oil-futures prices can improve our understanding of current conditions and future prospects in the global market for crude oil. First, the response of the oil-futures curve can be used to identify the persistence of oil-price shocks and to obtain an indicator of the rate at which they will diminish. Second, the spread between the current futures price and the spot price of oil can be interpreted as an indicator of the precautionary demand for oil. Third, because oil-futures prices are volatile, forecasts of the future spot price of oil using futures prices should be supplemented with other information to improve their accuracy. Content Type(s): Publications, Bank of Canada Review articles Topic(s): Econometric and statistical methods, Market structure and pricing
The Fisher BCPI: The Bank of Canada’s New Commodity Price Index Staff Discussion Paper 2010-6 Ilan Kolet, Ryan Macdonald The prices of commodities produced in Canada have important implications for the performance of the Canadian economy and the conduct of monetary policy. The authors explain an important change to the methodology used to construct the Bank of Canada commodity price index (BCPI). Content Type(s): Staff research, Staff discussion papers Topic(s): Econometric and statistical methods, Inflation and prices JEL Code(s): C, C1, E, E3
On the Advantages of Disaggregated Data: Insights from Forecasting the U.S. Economy in a Data-Rich Environment Staff Working Paper 2010-10 Nikita Perevalov, Philipp Maier The good forecasting performance of factor models has been well documented in the literature. While many studies focus on a very limited set of variables (typically GDP and inflation), this study evaluates forecasting performance at disaggregated levels to examine the source of the improved forecasting accuracy, relative to a simple autoregressive model. We use the latest revision of over 100 U.S. time series over the period 1974-2009 (monthly and quarterly data). Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, International topics JEL Code(s): C, C5, C50, C53, E, E3, E37, E4, E47
Market Expectations and Option Prices: Evidence for the Can$/US$ Exchange Rate Staff Discussion Paper 2010-2 Alejandro García, Andrei Prokopiw Security prices contain valuable information that can be used to make a wide variety of economic decisions. To extract this information, a model is required that relates market prices to the desired information, and that ideally can be implemented using timely and low-cost methods. Content Type(s): Staff research, Staff discussion papers Topic(s): Econometric and statistical methods, Exchange rates, Financial markets JEL Code(s): C, C0, C00, C02, G, G1, G13
March 9, 2010 Monetary Policy Rules in an Uncertain Environment Bank of Canada Review - Spring 2010 Gino Cateau, Stephen Murchison This article examines recent research on the influence of various forms of economic uncertainty on the performance of different classes of monetary policy rules: from simple rules to fully optimal monetary policy under commitment. The authors explain why uncertainty matters in the design of monetary policy rules and provide quantitative examples from the recent literature. They also present results for several policy rules in ToTEM, the Bank of Canada's main model for projection and analysis, including rules that respond to price level, rather than to inflation. Content Type(s): Publications, Bank of Canada Review articles Topic(s): Econometric and statistical methods, Economic models, Monetary policy and uncertainty, Monetary policy framework
What Drives Exchange Rates? New Evidence from a Panel of U.S. Dollar Bilateral Exchange Rates Staff Working Paper 2010-5 Jean-Philippe Cayen, Donald Coletti, René Lalonde, Philipp Maier We use a novel approach to identify economic developments that drive exchange rates in the long run. Using a panel of six quarterly U.S. bilateral real exchange rates – Australia, Canada, the euro, Japan, New Zealand and the United Kingdom – over the 1980-2007 period, a dynamic factor model points to two common factors. Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Exchange rates JEL Code(s): J, J3, J31
Estimating DSGE-Model-Consistent Trends for Use in Forecasting Staff Working Paper 2009-35 Jean-Philippe Cayen, Marc-André Gosselin, Sharon Kozicki The workhorse DSGE model used for monetary policy evaluation is designed to capture business cycle fluctuations in an optimization-based format. It is commonplace to log-linearize models and express them with variables in deviation-from-steady-state format. Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Econometric and statistical methods JEL Code(s): C, C3, C32, E, E3, E5, E52
A Consistent Test for Multivariate Conditional Distributions Staff Working Paper 2009-34 Fuchun Li, Greg Tkacz We propose a new test for a multivariate parametric conditional distribution of a vector of variables yt given a conditional vector xt. Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods JEL Code(s): C, C1, C12, C2, C22