Forecasting in Canada
Welcome to my new blog on economic forecasting. The goal is to discuss, compare and even evaluate alternative methods and tools for forecasting economic activity in Canada. I hope others involved in the business of forecasting will share their work, opinions and so on in this forum. Hopefully, we can understand the interaction of forecasting theory and practical forecasting. The two sometimes agree but as in any application there are tensions and confusion.
A word of apology or explanation, whatever seems to fit? I have been teaching times series in The Department of Economics at Queen’s University for more than 25 years. As such, I have become somewhat institutionalized as an instructor. However, if the tone comes off that way in this blog, it’s not intentional. This is meant to be a learning exercise for me, especially me. It’s easier to teach theory I have discovered, but actual confrontation with data and forecasting has been edifying.
We will commence with forecasting real growth but as time goes along we will likely branch out into other important variables like employment change, inflation and so on. Real growth seems the most sensible place to start since it is the mostly widely forecasted variable in the Canadian scene. In the U.S. the change in employment produced monthly by the Bureau of Labor Statistics would have that honour.
We also invite other professional forecasters to participate in this challenge as well. What we have in mind in this regard, is something akin to ThreeHundredEight (http://www.threehundredeight.com/) where we keep track of real growth predictions by various members of the Canadian forecasting community. These forecasts will just be a record and time of forecast without any detail of the model(s) or expertise behind them. However, our pledge is to describe exactly how our forecasts are done so those that the following at home can replicate them.
This web page is meant for the reader to get in real time the most recent information regarding the Canadian economy’s growth forecast. We are not going to be running a report card or accuracy tournaments. Instead we want a forum by which various forecasters and users of these can interact and discuss the different predictions and there implications for the Canadian economy.
There are at least two choices to be made regarding real growth
We think that there is widespread agreement among forecasters that quarterly growth rates (quarter over quarter) are most useful. I am going to start there with just a one –period ahead forecast. Our real growth rates are taken from Table 380 0064 and are seasonally adjusted at annual rates in chained 2007 dollars. Its label is Gross Domestic Product at Market Prices (available at Statistics Canada http://www.statcan.gc.ca/). This table is updated at regular intervals and is subject to revision.
Just to get this rolling I have taken from the Internet, real growth forecasts for 2015Q3 of the Canadian Banks along with 2 of mine (labelled AWG). In blue are the most recent forecasts identified by the Banks and myself with a time when the forecasts were (or I found them). I update my forecasts as you will see and I will explain that at a later date. Older forecasters are found below the blue one.
In this figure I also provide the historical average mean growth rate and as time goes on the actual first release real growth will be added along with the subsequent revisions.
What a great idea! I currently contribute a US forecast to the Philadelphia Fed's Survey of Professional Forecasters and I'd be happy to contribute my Canadian forecast to this project as well.ReplyDelete
- Brendon Ogmundson, BCREA
This is great, Allan. The only change I would like to see are value labels on the x axis. Looking forward to learning more.ReplyDelete
I'm interested to see where you go with this. I hope you will add the MPR when it comes out this week.ReplyDelete
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Do you have to be a "professional Canadian forecaster" to participate in this challenge? Or can you be an amateur with mathematical models that make forecasts about economic variables in Canada?ReplyDelete
Anyone can make forecasts. Free entry! Mathematical models are replicable by anyone. Hunches and guesses are person specific
Thanks for this
Thanks for the reply Allan. I wasn't asking on my own behalf, but on behalf of an amateur macro blogger (Jason Smith) I'm familiar with who has developed a set of mathematical models he uses to make forecasts about several different countries around the world (including Canada). His models (like you say) are usable by anyone, and he will share the source code for them. He writes about the mathematical expressions defining the models in his blog posts. The framework from which his models are derived is not mainstream, but IMO it's well thought out (he's a physicist and is familiar with theoretical frameworks), and documented. A year and a half ago he put forward a challenge to professional macro economists to put their models up against his, but no one took him up on it. Instead he's been comparing his performance in the US against a couple of Fed models. I'm very curious to see how he would have done against professional macro modelers, so I did my part to make the macro bloggers I read aware of his challenge. When I saw your blog here I thought it might be a good fit. Here are a few posts with Canada specific forecasts or analysis he's made (note the dates: they're not necessarily in order):Delete
Here's a whole set that mention Canada:
I love the idea of this challenge Allan! I hope you get a good response, and I hope that Jason is able to participate in some way since I've been following his approach for years now. I read about your blog on Dave Giles' blog.
All the best!
Even if Jason is not able to participate, I'll be curious to see how this challenge goes.Delete
Also, I love the title of your blog! Very straightforward! Lol. I called my first blog "Tom Brown's Blog" ... so I can see where you're coming from. (I've since changed the name... but not because I didn't like the old title... only because I opened it up to other authors... I "handed the keys to someone else" so to speak).