Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/210222 
Year of Publication: 
2011
Series/Report no.: 
Staff Memo No. 06/2011
Publisher: 
Norges Bank, Oslo
Abstract: 
Macroeconomic models are important ingredients in the monetary policy process, and, in the Norwegian case, projecting a forward interest rate path. In this paper we argue that when deciding on a model strategy, it is crucial to consider the purpose of models. If the purpose is to understand basic mechanisms in the economy and implications of economic policy, we need a set of models that highlight these features. If the purpose is to forecast short-term developments, a different set of models may be required. Given the complexity of the real world, we argue that it is better to provide the policymakers with a good characterization of uncertainty instead of only providing point forecasts, i.e. it is better to be "roughly right" than "exactly wrong". A robust strategy for handling uncertainty should be an inherent part of the preferred system of models.
Subjects: 
forecasting
forecast combination
monetary policy
robustness
Persistent Identifier of the first edition: 
ISBN: 
978-82-7553-612-7
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Research Report
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