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Forecasting Canadian Time Series With the New-Keynesian Model

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  • Ali Dib
  • Mohamed Gammoudi
  • Kevin Moran

Abstract

This paper documents the out-of-sample forecasting accuracy of the New Keynesian Model for Canada. We estimate our variant of the model on a series of rolling subsamples, computing out-of-sample forecasts one to eight quarters ahead at each step. We compare these forecasts to those arising from simple vector autoregression (VAR) models, using econometric tests for forecasting accuracy. Our results show that the forecasting accuracy of the New Keynesian model compares favorably to that of the benchmarks, particularly as the forecasting horizon is increased. These results suggest that the model could become a useful forecasting tool for Canadian time series.

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Bibliographic Info

Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 382.

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Date of creation: Dec 2006
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Handle: RePEc:chb:bcchwp:382

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Cited by:
  1. Tobias Kitlinski & Torsten Schmidt, 2011. "The Forecasting Performance of an Estimated Medium Run Model," Ruhr Economic Papers 0301, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  2. Haider, Adnan & Din, Musleh-ud & Ghani, Ejaz, 2012. "Monetary policy, informality and business cycle fluctuations in a developing economy vulnerable to external shocks," MPRA Paper 42484, University Library of Munich, Germany.
  3. Ali Dib, 2003. "Monetary Policy in Estimated Models of Small Open and Closed Economies," Working Papers 03-27, Bank of Canada.
  4. Alessia Paccagnini, 2012. "Comparing Hybrid DSGE Models," Working Papers 228, University of Milano-Bicocca, Department of Economics, revised Dec 2012.
  5. Manuel Ramos Francia & Alberto Torres García, 2006. "Inflation Dynamics in Mexico: A Characterization Using the New Phillips Curve," Working Papers 2006-15, Banco de México.
  6. Kitov, Ivan, 2007. "Exact prediction of inflation and unemployment in Canada," MPRA Paper 5015, University Library of Munich, Germany.
  7. Sylvain Dessy & Safa Ragued, 2013. "Multidimensional Poverty Targeting," Cahiers de recherche 1340, CIRPEE.
  8. Jean-Philippe Cayen & Marc-André Gosselin & Sharon Kozicki, 2009. "Estimating DSGE-Model-Consistent Trends for Use in Forecasting," Working Papers 09-35, Bank of Canada.
  9. Caraiani, Petre, 2008. "Forecasting Romanian GDP Using a Small DSGE Model," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 5(1), pages 182-192, March.
  10. Christopher Reicher, 2009. "What Can a New Keynesian Labor Matching Model Match?," Kiel Working Papers 1496, Kiel Institute for the World Economy.

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