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IMPACT: The Bank of Canada’s International Model for Projecting Activity

Author

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  • Patrick Blagrave
  • Claudia Godbout
  • Justin-Damien Guénette
  • René Lalonde
  • Nikita Perevalov

Abstract

We present the structure and features of the International Model for Projecting Activity (IMPACT), a global semi-structural model used to conduct projections and policy analysis at the Bank of Canada. Major blocks of the model are developed based on the rational error correction framework of Kozicki and Tinsley (1999), which allows the model to strike a balance between theoretical structure and empirical performance. IMPACT divides the world economy into six regions: United States, the euro area, Japan, China, oil-importing emerging-market economies and oil-exporting rest of the world. The model features a rich set of cross-border trade and financial linkages that have been shown in the literature to be crucial to explaining global co-movements in business cycles. It is also globally consistent in the sense that both net foreign assets and net exports must be equal to zero at the global level. These cross-region linkages and the global stock-flow consistency allow IMPACT to generate a rigorous and more complete picture of the evolution of the global economy to better inform policy.

Suggested Citation

  • Patrick Blagrave & Claudia Godbout & Justin-Damien Guénette & René Lalonde & Nikita Perevalov, 2020. "IMPACT: The Bank of Canada’s International Model for Projecting Activity," Technical Reports 116, Bank of Canada.
    • Handle: RePEc:bca:bocatr:116
    DOI: 10.34989/tr-116
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    References listed on IDEAS

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    Cited by:

    1. Guénette, Justin Damien & Kose, M. Ayhan & Sugawara, Naotaka, 2022. "Is a Global Recession Imminent?," MPRA Paper 114627, University Library of Munich, Germany.
    2. Omar Abdelrahman & David Chen & Cameron MacDonald & Adi Mordel & Guillaume Ouellet Leblanc, 2025. "Simulating the Resilience of the Canadian Banking Sector Under Stress: An Update of the Bank of Canada’s Top-Down Solvency Assessment Tool," Technical Reports 128, Bank of Canada.

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    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

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