On the Purpose of Models - the Norges Bank Experience

Bericht

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.

Object Details

• ISBN: 978-82-7553-612-7
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Staff Memo ; No. 06/2011

Classification and Topics

• Classification: Wirtschaft
• Subject: forecasting ; forecast combination ; monetary policy ; robustness

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Gerdrup, Karsten R. ; Nicolaisen, Jon
• Event: Veröffentlichung
• (who): Norges Bank
• (where): Oslo
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/210222
• Last update: 10.03.2025, 11:44 AM CET