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Does forecast combination improve Norges Bank inflation forecasts?

Hilde C. Bjørnland (hilde.c.bjornland@bi.no), Karsten R. Gerdrup (karsten.gerdrup@norges-bank.no), Anne Sofie Jore (anne-sofie.jore@norges-bank.no), Leif Thorsrud and Christie Smith (christierbnz@yahoo.com)
Authors registered in the RePEc Author Service: Hilde Christiane Bjørnland (hilde.c.bjornland@bi.no)

No No 2/2010, Working Papers from Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School

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 out-performs 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 out-perform the judgmental forecasts from the policymaker.

Keywords: Forecasting; forecast combination; model versus judgment (search for similar items in EconPapers)
JEL-codes: E37 E47 E52 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2010-12
References: Add references at CitEc
Citations: View citations in EconPapers (19)

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Related works:
Journal Article: Does Forecast Combination Improve Norges Bank Inflation Forecasts? (2012) Downloads
Working Paper: Does forecast combination improve Norges Bank inflation forecasts? (2009) Downloads
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