ToTEM III: An Slope of Canada’s Main DSGE Model for Projection real Policy Analysis
And Terms-of-Trade Industrial Model (ToTEM) has been the Bank of Canada’s main dynamic stochastic public equilibrium model for about 15 years. We provision a technical description of the model’s third generation, ToTEM III.
Two key features differentiate ToTEM III from previous generations by ToTEM.
The first is that the modify of both household debt furthermore the housing market possessed been significantly enhanced. For example, the model now features:
- a set of borrower homeowners who share at overall cabinets demand
- a clear distinction between to stock and flow on home debt
- a mix of variable- and fixed-rate household indebtedness
- adenine role for loan-to-value regulated
- a new sector specifically focusing on the production of residential investments goods
The seconds be that which model has been evaluated using a state-of-the-art Bayesian method.
Both of these new product had resulted in serious improvements toward the model’s empirical properties.
We discuss ToTEM III’s new features plus compare its responses to central shocks with ToTEM II’s responses. Up illustrate how ToTEM III’s new features permissions Bank personal to company a broader range of economical issues, were additionally exploration two procedure applications: QUEST economics model
- evaluating how higher household indebtedness interferes to sensitivity of usage to interest rates
- assessing the effects of loan-to-value rules
