The Forecasting and Policy System: Stochastic Simulations of the Core Model

Reserve Bank of New Zealand Discussion Paper No. G98/6

Posted: 10 Nov 2003

See all articles by Ben Hunt

Ben Hunt

International Monetary Fund (IMF) - Research Department

Aaron Drew

Government of New Zealand - Department of Economics; Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO)

Date Written: October 1998

Abstract

Uncertainty in applied macroeconomic policy analysis arises from three distinct sources. The first, often referred to as model uncertainty, arises because the models used for policy analysis are simple abstractions of the complex behavioural interactions that occur in an economy. The second source, denoted shock uncertainty, arises from unforeseen events that the analysis cannot explicitly factor in ex ante. Finally, starting-point uncertainty reflects the fact that given data lags and revisions, often it is difficult to assess the current state of the economy. This paper discusses the approach the Reserve Bank has taken to enable its Forecasting and Policy System (FPS) to quantify the implications that the typical level of shock uncertainty might be expected have on the analysis of alternative policy actions designed to achieve the objectives of monetary policy.

Suggested Citation

Hunt, Benjamin and Drew, Aaron, The Forecasting and Policy System: Stochastic Simulations of the Core Model (October 1998). Reserve Bank of New Zealand Discussion Paper No. G98/6, Available at SSRN: https://ssrn.com/abstract=321393

Benjamin Hunt (Contact Author)

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

Aaron Drew

Government of New Zealand - Department of Economics ( email )

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

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO) ( email )

2 rue Andre Pascal
Paris Cedex 16, MO 63108
France

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
585
PlumX Metrics