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Does forecast combination improve Norges Bank inflation forecasts?

Author

Listed:
  • Hilde C. Bjørnland

    (Norwegian School of Management (BI) and Norges Bank (Central Bank of Norway))

  • Karsten Gerdrup

    (Norges Bank (Central Bank of Norway))

  • Anne Sofie Jore

    (Norges Bank (Central Bank of Norway))

  • Christie Smith

    (Norges Bank (Central Bank of Norway))

  • Leif Anders Thorsrud

    (Norges Bank (Central Bank of Norway))

Abstract

We develop a system that provides model-based forecasts for inflation in Norway. Forecasts are recursively evaluated from 1999 to 2008. The performance of the models over this period is then used to derive weights that are used to combine the forecasts. Our results indicate that model combination improves upon the point forecasts from individual models. Furthermore, when comparing the whole forecasting period; model combination outperforms Norges Banks own point forecast for inflation at the forecast horizon up to a year. By using a suite of models we allow for a greater range of modelling techniques and data to be used in the forecasting process.

Suggested Citation

  • Hilde C. Bjørnland & Karsten Gerdrup & Anne Sofie Jore & Christie Smith & Leif Anders Thorsrud, 2009. "Does forecast combination improve Norges Bank inflation forecasts?," Working Paper 2009/01, Norges Bank.
    • Handle: RePEc:bno:worpap:2009_01
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications

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