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The Forecasting and Policy System: preparing economic projections

This paper outlines how the Reserve Bank of New Zealand's Forecasting and Policy System (FPS) is used to prepare the quarterly economic projections. In addition to a very brief overview of the system, the paper focuses on four key issues. First, the current methodology for incorporating a time-varying equilibrium path for the economy is presented. Second, the process for building up the central scenario through the application of judgement is outlined. Third, the use of alternative scenarios for testing the implications of key assumptions embodied in the central scenario is discussed. Finally, the technique employed to examine the implications that unforseen shocks have for the projections is discussed.

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Paper provided by Reserve Bank of New Zealand in its series Reserve Bank of New Zealand Discussion Paper Series with number G98/7.

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Length: 34p
Date of creation: Oct 1998
Date of revision:
Handle: RePEc:nzb:nzbdps:1998/07
Contact details of provider: Postal: P.O. Box 2498, Wellington
Phone: 64 4 471-3767
Fax: 64 4 471-2270
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  1. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
  2. Svensson, Lars E. O., 1997. "Inflation forecast targeting: Implementing and monitoring inflation targets," European Economic Review, Elsevier, vol. 41(6), pages 1111-1146, June.
  3. Peter A. Tinsley, 1993. "Fitting both data and theories: polynomial adjustment costs and error- correction decision rules," Finance and Economics Discussion Series 93-21, Board of Governors of the Federal Reserve System (U.S.).
  4. Drew, Aaron & Hunt, Benjamin, 2000. "Efficient simple policy rules and the implications of potential output uncertainty," Journal of Economics and Business, Elsevier, vol. 52(1-2), pages 143-160.
  5. Cogley, Timothy & Nason, James M., 1995. "Effects of the Hodrick-Prescott filter on trend and difference stationary time series Implications for business cycle research," Journal of Economic Dynamics and Control, Elsevier, vol. 19(1-2), pages 253-278.
  6. Paul Conway & Aaron Drew & Ben Hunt & Alasdair Scott, 1998. "Exchange rate effects and inflation targeting in a small open economy: a stochastic analysis using FPS," Reserve Bank of New Zealand Discussion Paper Series G99/4, Reserve Bank of New Zealand.
  7. James Breece & Vincenzo Cassino, 1998. "The Forecasting and Policy System: demand-side satellite models," Reserve Bank of New Zealand Discussion Paper Series G98/3, Reserve Bank of New Zealand.
  8. Hodrick, Robert J & Prescott, Edward C, 1997. "Postwar U.S. Business Cycles: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 1-16, February.
  9. Buiter, Willem H, 1988. "Death, Birth, Productivity Growth and Debt Neutrality," Economic Journal, Royal Economic Society, vol. 98(391), pages 279-93, June.
  10. Aaron Drew & Ben Hunt, 1998. "The Forecasting and Policy System: stochastic simulations of the core model," Reserve Bank of New Zealand Discussion Paper Series G98/6, Reserve Bank of New Zealand.
  11. Weil, Philippe, 1989. "Overlapping families of infinitely-lived agents," Journal of Public Economics, Elsevier, vol. 38(2), pages 183-198, March.
  12. Paul Conway & Ben Hunt, 1998. "Productivity growth in New Zealand: economic reform and the convergence hypothesis," Reserve Bank of New Zealand Discussion Paper Series G98/2, Reserve Bank of New Zealand.
  13. Paul Conway & Ben Hunt, 1997. "Estimating potential output: a semi-structural approach," Reserve Bank of New Zealand Discussion Paper Series G97/9, Reserve Bank of New Zealand.
  14. Alain Guay & Pierre St-Amant, 1997. "Do the Hodrick-Prescott and Baxter-King Filters Provide a Good Approximation of Business Cycles?," Cahiers de recherche CREFE / CREFE Working Papers 53, CREFE, Université du Québec à Montréal.
  15. Harvey, A C & Jaeger, A, 1993. "Detrending, Stylized Facts and the Business Cycle," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(3), pages 231-47, July-Sept.
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