Does Forecast Combination Improve Norges Bank Inflation Forecasts?*

17 Pages Posted: 10 Feb 2012

See all articles by Hilde C. Bjørnland

Hilde C. Bjørnland

affiliation not provided to SSRN

Karsten R. Gerdrup

Central Bank of Norway

Anne Sofie Jore

Norges Bank

Christie Smith

Government of New Zealand - Department of Economics

Leif Anders Thorsrud

Norges Bank; BI Norwegian Business School

Date Written: April 2012

Abstract

We develop a system that provides model‐based forecasts for inflation in Norway. We recursively evaluate quasi out‐of‐sample forecasts from a large suite of models from 1999 to 2009. The performance of the models are then used to derive quasi real time weights that are used to combine the forecasts. Our results indicate that a combination forecast improves upon the point forecasts from individual models. Furthermore, a combination forecast outperforms Norges Bank's own point forecast for inflation. The beneficial results are obtained using a trimmed weighted average. Some degree of trimming is required for the combination forecasts to outperform the judgmental forecasts from the policymaker.

JEL Classification: E52, E37, E47

Suggested Citation

Bjørnland, Hilde C. and Gerdrup, Karsten R. and Jore, Anne Sofie and Smith, Christie and Thorsrud, Leif Anders, Does Forecast Combination Improve Norges Bank Inflation Forecasts?* (April 2012). Oxford Bulletin of Economics and Statistics, Vol. 74, Issue 2, pp. 163-179, 2012. Available at SSRN: https://ssrn.com/abstract=2002483 or http://dx.doi.org/10.1111/j.1468-0084.2011.00639.x

Hilde C. Bjørnland (Contact Author)

affiliation not provided to SSRN

Karsten R. Gerdrup

Central Bank of Norway ( email )

P.O. Box 1179
Oslo, N-0107
Norway

Anne Sofie Jore

Norges Bank ( email )

P.O. Box 1179
Oslo, N-0107
Norway

Christie Smith

Government of New Zealand - Department of Economics ( email )

2 The Terrace
P.O. Box 2498
Wellington
New Zealand

Leif Anders Thorsrud

Norges Bank ( email )

P.O. Box 1179
Oslo, N-0107
Norway

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway

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