Evaluating a Central Bank’s Recent Forecast Failure

This file is part of IDEAS, which uses RePEc data

Evaluating a Central Bank’s Recent Forecast Failure

Author Info

Nymoen, Ragnar () (Dept. of Economics, University of Oslo)

Abstract

Failures are not rare in economic forecasting, probably due to the high incidence of shocks and regime shifts in the economy. Thus, there is a premium on adaptation in the forecast process, in order to avoid sequences of forecast failure. This paper evaluates a sequence of inflation forecasts in the Norges Bank Inflation Report, and we present automatized forecasts which are unaffected by forecast failure. One conclusion is that the Norges Bank fan-charts are too narrow, giving an illusion of very precise forecasts. The automatized forecasts show more adaptation once shocks have occurred than is the case for the official forecasts. On the basis of the evidence, the recent inflation forecast failure appears to have been largely avoidable. The central bank’s understanding of the nature of the transmission mechanism and of the strenght and nature of the disinflationly shock that hit the economy appear to have played a major role in the recent forecast failure.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help file. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

Publisher Info
Paper provided by Oslo University, Department of Economics in its series Memorandum with number 22/2005.

Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Length: 26 pages
Date of creation: 10 Aug 2005
Date of revision:
Handle: RePEc:hhs:osloec:2005_022

Contact details of provider:
Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
Email:
Web page: http://www.oekonomi.uio.no/indexe.html
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Cristian López).

Other versions of this item:

Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models
C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Other Model Applications
E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation
E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

This paper has been announced in the following NEP Reports:

NEP-ALL-2005-10-15 (All new papers)
NEP-CBA-2005-10-15 (Central Banking)
NEP-ECM-2005-10-15 (Econometrics)
NEP-ETS-2005-10-15 (Econometric Time Series)
NEP-FMK-2005-10-15 (Financial Markets)
NEP-FOR-2005-10-15 (Forecasting)
NEP-MAC-2005-10-15 (Macroeconomics)
NEP-MON-2005-10-15 (Monetary Economics)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Neil R. Ericsson, 2001. "Forecast uncertainty in economic modeling," International Finance Discussion Papers 697, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
Øyvind Eitrheim & Eilev S. Jansen & Ragnar Nymoen, 2002. "Progress from forecast failure -- the Norwegian consumption function," Econometrics Journal, Royal Economic Society, vol. 5(1), pages 40-64, June. [Downloadable!] (restricted)
Other versions:
- Eitrheim,O. & Jansen,E.S. & Nymoen,R., 2000. "Progress from forecast failure : the Norwegian consumption function," Memorandum 32/2000, Oslo University, Department of Economics. [Downloadable!]
Michael P. Clements & David F. Hendry, 2002. "Modelling methodology and forecast failure," Econometrics Journal, Royal Economic Society, vol. 5(2), pages 319-344, 06. [Downloadable!] (restricted)
Gunnar Bårdsen & Eilev S. Jansen & Ragnar Nymoen, 2000. "Model Specification and Inflation Forecast Uncertainty," Working Paper Series 1302, Department of Economics, Norwegian University of Science and Technology, revised 29 Jan 2002. [Downloadable!]
Gunnar Bardsen & Eilev S. Jansen & Ragnar Nymoen, 2003. "Econometric inflation targeting," Econometrics Journal, Royal Economic Society, vol. 6(2), pages 430-461, December. [Downloadable!] (restricted)
Other versions:
- Gunnar Bårdsen & Eilev S. Jansen & Ragnar Nymoen, 1999. "Econometric Inflation Targeting," Working Paper Series 0502, Department of Economics, Norwegian University of Science and Technology, revised 30 Oct 2001. [Downloadable!]
Gunnar Bårdsen & Ragnar Nymoen, 2003. "Testing Steady-State Implications for the NAIRU," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 1070-1075, 07. [Downloadable!] (restricted)
Other versions:
- Gunnar Bårdsen & Ragnar Nymoen, 2000. "Testing Steady-State Implications for the NAIRU," Working Paper Series 1602, Department of Economics, Norwegian University of Science and Technology, revised 30 Apr 2002. [Downloadable!]

Full references

Statistics
Access and download statistics

Did you know? RePEc also has a blog.

This page was last updated on 2008-8-28.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.