EconPapers    
Economics at your fingertips  
 

An Improved Equation for Predicting Canadian Non-Commodity Exports

Patrick Alexander (), Jean-Philippe Cayen and Alex Proulx

Discussion Papers from Bank of Canada

Abstract: We estimate two new equations for Canadian non-commodity exports (NCX) that incorporate three important changes relative to the current equation used at the Bank of Canada. First, we develop two new foreign activity measures (FAMs), which add new components to the FAM currently used at the Bank of Canada. The first measure adds US exports and US government expenditures, and the second adds US industrial production. These new FAMs calibrate the weights on the various components based on the 2014 World Input-Ouput Database to avoid the instability problem that arises when the equations are estimated. Second, we add a new variable to the equations, the trend of Canada’s manufacturing share of output, to control for structural or competitiveness factors that affect Canada’s global import market share. Third, the relative price of exports is determined by a new measure of the Canadian real effective exchange rate developed by Barnett, Charbonneau and Poulin-Bellisle (2016). We find that the new equations improve the in-sample fit and the out-of-sample forecast accuracy relative to the current equation specified in “LENS,” a forecasting model used at the Bank of Canada.

Keywords: Balance of payments and components; Exchange rates; International topics (search for similar items in EconPapers)
JEL-codes: F10 F14 F17 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-for and nep-int
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
http://www.bankofcanada.ca/wp-content/uploads/2017/01/sdp2017-1.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bca:bocadp:17-1

Access Statistics for this paper

More papers in Discussion Papers from Bank of Canada 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada.
Bibliographic data for series maintained by ().

 
Page updated 2018-09-26
Handle: RePEc:bca:bocadp:17-1