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NAOMI A New Quarterly Forecasting Model Part II: A Guide to Canadian NAOMI

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  • Stephen Murchison

Abstract

This paper provides an introduction to the Canadian side of NAOMI (North American Open economy Macro-econometric Integrated model), a new economic model developed at the Department of Finance. NAOMI is intended to bridge the gap between pure forecasting models whose forecasts are often difficult to interpret and dynamic general equilibrium models whose predictions often lack precision. NAOMI’s intended purpose is to provide quarterly macroeconomic forecasts of the Canadian and U.S. economies along with a measure of the uncertainty associated with each forecast. While ideally suited to this task, NAOMI is also capable of providing sensible answers to a limited set of more general policy questions. Specifically, it may be employed to address both the likelihood and economic implications of a particular risk to the forecast. This paper provides a detailed description of the economic assumptions underlying NAOMI’s structure. In addition, a complete set of deterministic shocks is included to illustrate the model’s simulation properties. Finally, model validation is provided through an extensive set of out-of-sample forecast statistics. Cet article offre une introduction au bloc canadien de MIOAN (modèle Macro-économique Intégré de l'économie Ouverte de l'Amérique du Nord), un nouveau modèle économique élaboré au ministère des Finances. Le modèle MIOAN vise à faire le pont entre les modèles prévisionnels purs, dont les prévisions sont souvent difficiles à interpréter, et les modèles d'équilibre général dynamiques, dont les prévisions manquent souvent de précision. Le modèle MIOAN vise à fournir des prévisions macro-économiques trimestrielles relatives aux économies canadienne et américaine, ainsi qu'une mesure de l'incertitude associée à chaque prévision. Bien qu'il ait été expressément conçu à cette fin, le modèle MIOAN permet également d'obtenir des réponses structurées à une série plus limitée de questions générales de politique. Spécifiquement, il permet d'évaluer à la fois la probabilité et les implications économiques d'un risque spécifique associé à la prévision. L'article offre une description détaillée des hypothèses économiques qui sous-tendent la structure du modèle MIOAN. De plus, un ensemble complet de chocs déterministiques est inclus afin d'illustrer les propriétés de simulation du modèle. Enfin, la validation du modèle est illustrée par un ensemble exhaustif de statistiques prévisionnelles hors-échantillon.

Suggested Citation

  • Stephen Murchison, "undated". "NAOMI A New Quarterly Forecasting Model Part II: A Guide to Canadian NAOMI," Working Papers-Department of Finance Canada 2001-25, Department of Finance Canada.
  • Handle: RePEc:fca:wpfnca:2001-25
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    Cited by:

    1. Denise Côté & John Kuszczak & Jean-Paul Lam & Ying Liu & Pierre St-Amant, 2004. "The performance and robustness of simple monetary policy rules in models of the Canadian economy," Canadian Journal of Economics, Canadian Economics Association, vol. 37(4), pages 978-998, November.
    2. Cote, Denise & Kuszczak, John & Lam, Jean-Paul & Liu, Ying & St-Amant, Pierre, 2006. "A comparison of twelve macroeconomic models of the Canadian economy," Journal of Policy Modeling, Elsevier, vol. 28(5), pages 523-562, July.
    3. Andrew Rennison, 2003. "Comparing Alternative Output-Gap Estimators: A Monte Carlo Approach," Staff Working Papers 03-8, Bank of Canada.
    4. Nicholas Rowe & David Tulk, 2003. "A Simple Test of Simple Rules: Can They Improve How Monetary Policy is Implemented with Inflation Targets?," Staff Working Papers 03-31, Bank of Canada.

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