Forecasting Canadian Time Series with the New-Keynesian Model

CIRPÉE Working Paper No. 05-27

42 Pages Posted: 11 Oct 2005

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

Multiple version iconThere are 2 versions of this paper

Date Written: September 2005

Abstract

This paper documents the out-of-sample forecasting accuracy of the New Keynesian Model for Canada. We repeatedly estimate our variant of the model on a series of rolling subsamples, forecasting out-of-sample one to eight quarters ahead at each step. We then compare these forecasts to those arising from simple VARs, using econometric tests of forecasting accuracy. Our results show that the forecasting accuracy of the New Keynesian model compares favourably to that of the benchmarks, particularly as the forecasting horizon increases. These results suggest that the model can become a useful forecasting tool for Canadian time series. The principle of parsimony is invoked to explain our findings.

Keywords: New Keynesian Model, Forecasting model

JEL Classification: C53, E37

Suggested Citation

Dib, Ali and Gammoudi, Mohamed and Moran, Kevin, Forecasting Canadian Time Series with the New-Keynesian Model (September 2005). CIRPEE Working Paper No. 05-27. Available at SSRN: https://ssrn.com/abstract=814745 or http://dx.doi.org/10.2139/ssrn.814745

Ali Dib

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 (Contact Author)

Laval University - Department of Economics ( email )

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

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