Forecasting Canadian Time Series with the New Keynesian Model

28 Pages Posted: 11 Jan 2008

See all articles by Ali Dib

Ali Dib

Bank of Canada - Department of Monetary and Financial Analysis

Mohamed Gammoudi

Bank of Canada

Kevin Moran

Laval University - Department of Economics

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Abstract

This paper assesses the out-of-sample forecasting accuracy of the New Keynesian Model for Canada. We estimate a 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 with those arising from vector auto-regression (VAR) models, using econometric tests of forecasting accuracy. We show that the forecasting accuracy of the New Keynesian Model compares favorably with that of the benchmarks, particularly as the forecasting horizon increases. These results suggest that the model could become a useful forecasting tool for Canadian time series.

Suggested Citation

Dib, Ali and Gammoudi, Mohamed and Moran, Kevin, Forecasting Canadian Time Series with the New Keynesian Model. Canadian Journal of Economics, Vol. 41, Issue 1, pp. 138-165, February 2008. Available at SSRN: https://ssrn.com/abstract=1082604 or http://dx.doi.org/10.1111/j.1365-2966.2008.00458.x

Ali Dib (Contact Author)

Bank of Canada - Department of Monetary and Financial Analysis ( email )

234 Wellington Street
Ottawa, Ontario K1A 0G9
Canada
613-782-7851 (Phone)

Mohamed Gammoudi

Bank of Canada ( email )

234 Wellington Street
Ontario, Ontario K1A 0G9
Canada

Kevin Moran

Laval University - Department of Economics ( email )

2325 Rue de l'Université
Ste-Foy, Quebec G1K 7P4 G1K 7P4
Canada

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