E47 - Forecasting and Simulation: Models and Applications

• Making It Real: Bringing Research Models into Central Bank Projections

  Staff Discussion Paper 2023-29 Marc-André Gosselin, Sharon Kozicki

  Macroeconomic projections and risk analyses play an important role in guiding monetary policy decisions. Models are integral to this process. This paper discusses how the Bank of Canada brings research models and lessons learned from those models into the central bank projection environment.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Economic models, Monetary policy JEL Code(s): C, C3, C32, C5, C51, E, E3, E37, E4, E47, E5, E52

• It takes a panel to predict the future: What the stock market says about future economic growth in Canada

  Staff Analytical Note 2023-9 Greg Adams, Jean-Sébastien Fontaine

  Valuation ratios in the Canadian stock market can help reveal investors’ expectations about future economic growth because the impact of economic growth on valuation ratios can vary across industries. We find that this variation helps produce accurate forecasts of future growth of real gross domestic product in Canada. The forecasts from our model declined by just over 3 percentage points between January 2022 and February 2023—a period when the Bank of Canada rapidly increased the overnight rate. As well, we find that interest-rate-sensitive industries had an outsized contribution to this expected slowdown in growth. 

  Content Type(s): Staff research, Staff analytical notes Topic(s): Asset pricing, Financial markets, Monetary policy transmission JEL Code(s): E, E4, E44, E47, E5, E52

• Central Bank Forecasting: A Survey

  Staff Working Paper 2023-18 Carola Conces Binder, Rodrigo Sekkel

  We review the literature on central bank forecasting with a special focus on the Federal Reserve, European Central Bank, Bank of England and Bank of Canada.

  Content Type(s): Staff research, Staff working papers Topic(s): Monetary policy JEL Code(s): E, E4, E47, E5, E52, E58