Evaluation of Norges Bank’s Projections for 2000

Abstract

Norges Bank’s projections for developments in the Norwegian and international economy form an important basis for monetary policy decisions. Norges Bank places emphasis on the importance of evaluating the projections in the Inflation Report and on the transparency of our forecasting work. This is why the Bank reports regularly on the evaluation of its projections and examines the sources of forecast errors. Analyses of Norges Bank’s projections for the years 1996-1999 have been published earlier1). In this article, we analyse the projections for 2000 as presented in the December 1998 and December 1999 Inflation Reports. In December 1998 it was assumed that the Norwegian economy would show a relatively pronounced downturn through 1999 and 2000. It turned out that the downturn was far less pronounced than expected, and that the two-years-ahead projections were therefore not very accurate. The projections for 2000 published in the December 1999 Inflation Report were closer to the outcome. Norges Bank’s projections are also compared with those of other institutions. The projections for consumer price inflation published by the Ministry of Finance, Statistics Norway and market participants have shown approximately the same degree of accuracy.