New BoC database boosts central bank’s transparency

By Staff | November 1, 2018 | Last updated on November 1, 2018
2 min read

For the first time, the Bank of Canada (BoC) has launched a database that includes more than 30 years’ worth of Canadian economic projections from central bank staff.

The projections—prepared by staff analysts—are used by the BoC’s governing council when it creates its quarterly monetary policy report (MPR), and the data are being released to help the central bank become more open and transparent, a Thursday release says.

“The projections combine real-time data and forecasts for key macroeconomic indicators, such as real GDP and its components, consumer price inflation, the output gap, the unemployment rate and the implied policy rate path running through the staff projection,” the release says.

Council members review and adjust the data to “ultimately develop their own consensus forecast for the Canadian and global economies, as depicted in the MPR,” it adds.

A report accompanying the release says staff economic forecasts “play a critical role in the effective implementation of monetary policy,” given more accurate forecasts can lead to more effective policy decisions that are correctly timed.

The BoC is inspired by the approaches of other central banks and organizations, including the U.S. Federal Reserve, IMF and World Bank. The Fed, for example, “publishes both its staff and the Federal Open Market Committee (FOMC) forecasts,” the report says, and the Fed’s staff projections in particular have been used in the study of empirical macroeconomics—of growth drivers and trends—and to assess the effectiveness of monetary policy.

The new data from the BoC will be useful for researchers, the central bank says in the release, because the range “covers some important economic milestones, including the Bank’s move to inflation targeting in 1991, and several severe recessions.”

When it comes to recessions, the BoC finds that staff “cannot predict recessions [four]-quarters-ahead,” says the report. Consequently, recessions “can cause large and serially correlated negative forecast errors.”

However, when staff’s overall predictions are compared to the forecasts of other professional analysts, they “fare relatively well,” especially over short periods.

Read the full report for more on the BoC’s staff and MPR forecasts, including how they measure the accuracy and bias of the information.

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Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.