Printer icon Print Page

Provincial Forecasting Model

The Provincial Medium-Term Forecasting Model (PMTFM) is a quarterly, bottom-up econometric model of the 10 provincial economies and three territories combined. The model defines not only real gross domestic product (GDP) at basic prices by province, but also real GDP at market prices in the case of Quebec and Ontario. In fact, economic activity in Canada’s two largest provinces is expenditure-based, and the model structure for these two is very similar to that of the national forecasting model, the MTFM.

PMTFM includes over 2,100 equations, of which roughly half are behavioural or stochastic, while the others are accounting or definitional equations. Most of the exogenous variables in the model are national indicators. For each province, there are a number of simultaneous blocks of equations, including final domestic demand (personal consumption, government spending, residential and non-residential business investment), production by industry, income, prices, and labour market blocks. The provincial model also has an endogenous provincial population block in which net interprovincial migration plays a key role in determining overall population growth.

Provincial expenditures determine industrial output through the use of full input–output frameworks for all provinces. Provincial real GDP by industry establishes labour market conditions that, in turn, influence population (through interprovincial migration), prices, and income. The labour market block includes employment, labour force, unemployment, and the unemployment rate. Employment is divided into 11 sector categories. Within PMTFM, the employment block was expanded in August and September 2010, with the model now breaking down employment into 11 Labour Force Survey (LFS) categories. As a result, PMTFM’s labour productivity block and average hours worked have also been expanded to the 11 LFS categories.1 Employment is modelled as a function of industrial output, labour productivity, and hours worked. The dynamics and linkages in PMTFM are freely estimated and thus are different for all the provinces.

Moreover, PMTFM incorporates a breakdown of private business investment into energy and non-energy investment. Investment by province is built up on a project-by-project basis for energy-related investment, and also for non-energy industrial, commercial, and institutional investment for all provinces and territories. Various sources of information are used to monitor ongoing and proposed private business investment projects, as well as association or industry contacts.

The Quebec and Ontario sub-models are based on the neoclassical Keynesian synthesis and possess many of the properties associated with the national model. Prices respond to aggregate demand conditions as well as to intermediate material costs, international and interprovincial import prices, and changes in the indirect tax structure. Potential output and the output gap are fully integrated in the models; thus, the gap and speed of gap closure are explicitly introduced into most price equations to represent supply-side feedback. Potential output and total factor productivity are derived from a Cobb-Douglas production function modelled in terms of capital and labour. Quebec and Ontario models also include several categories of both nominal and real trade flows at the international and interprovincial levels.

1 The new LFS industry breakdown within PMTFM is as follows: agriculture and support activities; other primary, including forestry, fishing and mining; utilities; construction; manufacturing; trade; transportation and warehousing; finance, insurance, real estate, and leasing; other commercial services; non-commercial services (educational services, health care and social assistance) and public administration.

What Data is Available?

The indicators produced by the provincial forecasting model are available in our Provincial Forecast (Five-year) Database Service.

View the data available in the Provincial Forecast (Five-year) Database Service

Forecasts and research often involve numerous assumptions and data sources, and are subject to inherent risks and uncertainties. This information is not intended as specific investment, accounting, legal, or tax advice.

Purchase Data

Create an account to purchase data from our e-Data site. If you need this data on a regular basis, consider a database subscription.