The Bank of Canada's Version of the Global Economy Model (BoC-GEM)
The Bank of Canada's version of the Global Economy Model (BoC-GEM) is derived from the model created at the International Monetary Fund by Douglas Laxton (IMF) and Paolo Pesenti (Federal Reserve Bank of New York and National Bureau of Economic Research). The GEM is a dynamic stochastic general-equilibrium model based on an optimizing representative-agent framework with balanced growth, and some additional features to help mimic the overlappinggenerations' class of models. Moreover, there is a concrete role for fiscal policy (albeit not fully optimized) and monetary policy. At the Bank, the model has been extended beyond the standard version with tradable and non-tradable goods sectors to include both oil and non-oil commodities. Furthermore, the oil sector is decomposed into oil for production and oil for retail consumption. The authors provide a detailed technical description of the model's structure and calibration. They also describe the model's simulation properties for Canadian and U.S. domestic shocks, and describe how the model can be used to analyze issues that currently are at the forefront for the Canadian and global economies, such as trade protectionism, global imbalances, and increasing oil prices.