Canadian Quarterly Model

Global Insight's Canadian Macroeconomic Model (CMM) was completely re-designed over the 2001-03 period, and is continually updated. It maintains the best features of the WEFA and DRI Canadian models, and reflects recent developments in modeling of the Canadian economy along with the latest econometric techniques. The model is designed to both be able to capture the key drivers of the Canadian economy and display appropriate responses to major demand, supply and price shocks. The model is user friendly, and many clients run it themselves. Both these clients and Global Insight rely on the model for short- and long-term forecasting, risk analysis, and consulting work.

CMM maintains a theoretically consistent structure, with overall output determined by a neo-classical production function and the rate of capacity utilization. Several Keynesian short-term relationships are introduced into the model, including the explicit output gap measure that impacts employment, consumption, investment, wages, and prices in the short-term. Inventory investment is endogenous in the model over the long run, rather than being simply a residual in the Keynesian GDP add-up.

Wherever desirable and possible, stochastic equations are specified in an error-correction framework. This framework captures the long-term relationships, while allowing for short-term adjustments. All key expenditure demand equations, price equations, and the Canadian dollar equation are cast in this framework.