Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/246142 
Year of Publication: 
2020
Series/Report no.: 
Staff Memo No. 2/2020
Publisher: 
Norges Bank, Oslo
Abstract: 
This paper documents a new feature in Norges Bank's policy model NEMO, namely the ability to handle structural break points, i.e. shifts in one or more parameter values at a specific point in time. This property is introduced to enable the model to answer new policy-relevant questions, such as the effect of changes in the inflation target and the effect of a sudden drop in the expected long-term oil price. We document the theoretical solution technique and illustrate its usage through a practical example. Additionally, we present a procedure for estimating break points. Our results indicate that including structural shifts is important when interpreting data. Neglecting structural shifts can lead to wrong interpretations of history, which, potentially, could also affect forecast performance.
Persistent Identifier of the first edition: 
ISBN: 
978-82-8379-137-2
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Research Report
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