Risk Scenarios and Macroeconomic Forecasts

Kevin Moran, Dalibor Stevanovic and Stéphane Surprenant
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Stéphane Surprenant: University of Quebec in Montreal

No 24-01, Working Papers from Chair in macroeconomics and forecasting, University of Quebec in Montreal's School of Management

Abstract: This paper discusses the usefulness of risk scenarios – forecasts conditional on specific future paths for economic variables and shocks – for monitoring the Canadian economy. To do so, we use a Vector Autoregressive (VAR) approach to produce macroeconomic forecasts conditional on four risk scenarios: high oil prices, a US recession, a tight labor market, and a restrictive monetary policy. The results show that these scenarios represent significant risk factors for the evolution of the Canadian economy. In particular, the high-oil-price scenario is beneficial for the Canadian economy, while a US recession induces a significant slowdown. The very tight labor market scenario leads to additional price increases relative to benchmark and the restrictive monetary policy scenario increases the unemployment rate while lowering the inflation rate slightly.

Keywords: Economic forecasts; risk scenarios; VAR; macroeconomic fluctuations; conditional forecasts (search for similar items in EconPapers)
JEL-codes: E32 F41 F44 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2024-04, Revised 2024-04
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Persistent link: https://EconPapers.repec.org/RePEc:bbh:wpaper:24-01

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