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Models in Policy-Making

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This article examines another strategy in the Bank's approach to dealing with an uncertain world: the use of carefully articulated models to produce economic forecasts and to examine the implications of the various risks to those forecasts. Economic models are deliberate simplifications of a complex world that allow economists to make predictions that are reasonably accurate and that can be easily understood and communicated. By using several models, based on competing paradigms, the Bank minimizes policy errors that could result from relying on one view of the world and one philosophy of model design. The authors review some of the models currently used at the Bank, as well as the role of judgment in the projection process.

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  • Don Coletti & Stephen Murchison, 2002. "Models in Policy-Making," Bank of Canada Review, Bank of Canada, vol. 2002(Spring), pages 19-26.
  • Handle: RePEc:bca:bcarev:v:2002:y:2002:i:spring02:p:19-26
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    File URL: http://www.bankofcanada.ca/wp-content/uploads/2010/06/coletti_e.pdf
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    Cited by:

    1. Teresa Leal & Javier J. Pérez & Mika Tujula & Jean-Pierre Vidal, 2008. "Fiscal Forecasting: Lessons from the Literature and Challenges," Fiscal Studies, Institute for Fiscal Studies, vol. 29(3), pages 347-386, September.
    2. Barbara Rossi, 2013. "Exchange Rate Predictability," Journal of Economic Literature, American Economic Association, vol. 51(4), pages 1063-1119, December.
    3. Kozicki, Sharon, 2012. "Macro has progressed," Journal of Macroeconomics, Elsevier, vol. 34(1), pages 23-28.
    4. Hilde C. Bjørnland & Karsten Gerdrup & Anne Sofie Jore & Christie Smith & Leif Anders Thorsrud, 2012. "Does Forecast Combination Improve Norges Bank Inflation Forecasts?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 74(2), pages 163-179, April.
    5. Marc-André Gosselin, 2007. "Central Bank Performance under Inflation Targeting," Staff Working Papers 07-18, Bank of Canada.
    6. Todd E. Clark & Michael W. McCracken, 2013. "Evaluating the accuracy of forecasts from vector autoregressions," Working Papers 2013-010, Federal Reserve Bank of St. Louis.

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