The Bank of Canada is changing the sophisticated models it uses to forecast the economy because those models failed to predict “the deep and persistent aftershocks of the global financial crisis” of 2007-2009.
This is a perfect example of the quote from Keynes that “Economics is a science of thinking in terms of models joined to the art of choosing models which are relevant to the contemporary world.”
Previous models did not adequately incorporate the linkages between the financial system and the real economy. According to the Governor of the Bank of Canada, “Economic models are not crystal balls. The fact that models can only deliver an approximation of the truth means that conducting monetary policy is not a mechanical exercise”
Instead, he suggested that modelling is as much an art as science.