IMPACT: The Bank of Canada’s International Model for Projecting Activity

Patrick Blagrave, Claudia Godbout, Justin-Damien Guenette, René Lalonde and Nikita Perevalov

No 116, Technical Reports from Bank of Canada

Abstract: We present the structure and features of the International Model for Projecting Activity (IMPACT), a global semi-structural model used to conduct projections and policy analysis at the Bank of Canada. Major blocks of the model are developed based on the rational error correction framework of Kozicki and Tinsley (1999), which allows the model to strike a balance between theoretical structure and empirical performance. IMPACT divides the world economy into six regions: United States, the euro area, Japan, China, oil-importing emerging-market economies and oil-exporting rest of the world. The model features a rich set of cross-border trade and financial linkages that have been shown in the literature to be crucial to explaining global co-movements in business cycles. It is also globally consistent in the sense that both net foreign assets and net exports must be equal to zero at the global level. These cross-region linkages and the global stock-flow consistency allow IMPACT to generate a rigorous and more complete picture of the evolution of the global economy to better inform policy.

Keywords: Business fluctuations and cycles; Econometric and statistical methods; Economic models; International topics (search for similar items in EconPapers)
JEL-codes: C68 E37 F47 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2020
New Economics Papers: this item is included in nep-int and nep-mac
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Citations: View citations in EconPapers (1)

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