MACROECONOMIC MODELS AND POLICY-MAKING AT THE BANK-OF-CANADA

Operating in a flexible exchange rate regime, and managed by professio nal economists with a long experience within the institution, the Bank of Canada is one central bank where model-based projections play a ce ntral role in shaping and informing the internal deliberations about t he formulation and conduct of monetary policy. As a result, the needs of policy-makers are a foremost consideration for staff that develop a nd use models. This paper describes the trends in policy formulation a nd model development at the Bank of Canada over the last 25 years, emp hasizing the interactions between them, and explains the move away fro m large-scale disaggregated models towards a smaller, more focused mod el that can be used for both policy analysis and economic projections. (C) 1998 Elsevier Science B.V. All rights reserved.