Service Foundations - the Models

TIM models the economy at the national level. RIM uses the national forecast of TIM to produce forecasts for Canada's ten provinces and two territories. Together, they provide an integrated and consistent framework within which organizational strategies and public policy can be examined and assessed.

The models are highly detailed. This yields major benefits:

• More realistic models. Example - demand for consumer durables can be modeled by a single equation. But separate equations that distinguish between (for example) autos and appliances adds realism - what drives demand for these two consumer durables is different. The same applies to industries - the Transportation Equipment Manufacturing industry can be modeled as a unit. But more realism is achieved by modeling separately the manufacturers of aircraft, cars and trucks, parts and accessories, railroad rolling stock and shipbuilders. What drives these industries is different.

• More relevant forecasts. The same example works here - a forecast of consumer durables is helpful if your business is driven by auto demand. But you are further ahead if you have a forecast of demand for autos. You are even further ahead if your forecast distinguishes between passenger cars and trucks/vans, and if passenger cars are split between new and used. The detail brings the forecast that much closer to home.

• More analytical precision. Same example works again. If we are to assess the effects of a "tire" tax on new passenger cars, a model with only a single equation for durables demand (or say, a single transportation equipment industry) is going to be a very blunt instrument. A model that splits new from used, and passenger cars from other vehicles (or on the industry side, aircraft manufactures from those of cars and trucks) will make the assessment that much more precise.

• A richer information base: The care and feeding of these large models requires a rich and extensive underlying database. (These models "push the envelope" of available data.) This information base is a major resource for our clients to exploit, not only for planning, but for historical context as well.

The models are simultaneous: in the real economy everything is connected. So too in our models. They incorporate extensive linkages that feed forward and back to all parts of the model. This ensures internal consistency: our outlook for industrial growth is consistent with that for government fiscal and monetary policy, with the inflation outlook, with the domestic demand, with foreign trade, with ...

The models are dynamic: events in the real economy have effects that feed forward into the future. Our models incorporate these dynamic relationships and produce a time path for the forecasts. The dynamic nature of the models also enable us to explore the future consequences of present decisions.