Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/44951 
Year of Publication: 
2011
Series/Report no.: 
Economics Discussion Papers No. 2011-6
Publisher: 
Kiel Institute for the World Economy (IfW), Kiel
Abstract: 
This paper evaluates inflation forecasts made by Norges Bank which is recognized as a successful forecast targeting central bank. It is reasonable to expect that Norges Bank produces inflation forecasts that are on average better than other forecasts, both 'naïve' forecasts, and forecasts from econometric models outside the central bank. The authors find that the superiority of the Bank's forecast cannot be asserted, when compared with genuine ex-ante real time forecasts from an independent econometric model. The 1-step Monetary Policy Report forecasts are preferable to the 1-step forecasts from the outside model, but for the policy relevant horizons (4 to 9 quarters ahead), the forecasts from the outsider model are preferred with a wider margin. An explanation in terms of too high speed of adjustment to the inflation target is supported by the evidence. Norges Bank's forecasts are convincingly better than 'naïve' forecasts over the second half of our sample, but not over the whole sample, which includes a change in the mean of inflation.
Subjects: 
inflation forecasts
monetary policy
forecast comparison
forecast targeting central bank
econometric models
JEL: 
C32
C53
E37
E44
E47
E52
E58
E65
Creative Commons License: 
cc-by-nc Logo
Document Type: 
Working Paper

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