Gems from the Boffins at the Bank of Canada

I have great respect for the boffins at The Bank of Canada and Statistics Canada – agencies which have done a great service to the country. The work of these boffins is qualitatively different from the private and academic sectors and is, in my view, irreplaceable.

The breadth of topics addressed by the boffins is comprehensive – everything from the dynamics of the housing market to the economics of private digital currency. You can enter into their world via this portal: http://www.bankofcanada.ca/publications-research/research/working-papers/

For example, the forecasts of future oil prices from agencies such as the U.S. Energy Information Administration are often inaccurate. Wonder why? Aside from the difficulty caused by such a multivariate universe, there are other factors at work. To learn more, read one of the BoC recent papers, Forecasting the Real Price of Oil in a Changing World: A Forecast Combination Approach

The U.S. Energy Information Administration regularly publishes short-term forecasts of the price of crude oil. Traditionally, such out-of-sample forecasts have been largely judgmental, making them difficult to replicate and justify, and not particularly successful when compared with naïve no-change forecasts, as documented in Alquist, Kilian and Vigfusson (2013)...

First, even the most accurate forecasting models do not work equally well at all times. Second, some forecasting models work better at short horizons and others at longer horizons. Third, even the forecasting model with the lowest mean-squared prediction error (MSPE) may potentially be improved by incorporating information from other models with higher MSPEs. Fourth, one can think of forecast combinations as providing insurance against possible model misspecification and smooth structural change. We demonstrate that over the past 20 years suitably constructed real-time forecast combinations would have been more accurate than the no-change forecast at every horizon up to two years. http://www.bankofcanada.ca/2013/08/publications/research/working-paper-2013-28/

The BofC also offers a variety of useful tools: everything from currency converters, to inflation calculators, to comprehensive information on interest rates. http://www.bankofcanada.ca/rates/


Want to know why Canada's inflation target has been set to 2 percent? Read on: http://www.bankofcanada.ca/wp-content/uploads/2010/11/why_canada_inflation_target.pdf