The state of the art in Canadian macroeconomic modelling

The Department of Finance employs extensively a large macroeconomic model of the Canadian economy -- the QFS model(Quarterly Forecasting and Simulation Model) -- for economic and fiscal forecasting and simulation exercises. As with any large macroeconomic model, and particularly one that plays a role in the public policy debate, there is an on-going analytical and econometric research programme associated with the QFS model. The research plan underlying the QFS model stresses a commitment to building on current Canadian modelling research rather than pursuing a totally independent model development strategy. The QFS model should be in the mainstream of Canadian macroeconomic models, exhibiting generally accepted economic properties and incorporating current analytical research. In the course of this research programme we have amassed and reviewed a large body of literature on Canadian macroeconomic models. In particular, we gained valuable insights into the dynamic properties of the various Canadian macroeconomic models from the 1982 Seminar on Responses of Various Models to Selected Policy Shocks, sponsored by the Bank of Canada and the Department of Finance. However, for our purposes, we required an up-to-date and comprehensive source document on the structure and underlying theory in the various Canadian macroeconomic models, and a review of the general themes or trends in Canadian macroeconomic modelling. It was to this end that we commissioned a report on the "state of the art" in Canadian macroeconomic models. The report, which was prepared by Grady Economic & Associates Ltd., provides valuable background material for our modelling efforts, and as well, is an important source document for research studies in macroeconomic modelling in Canada.