The Role of Assessments and Judgement in the Macroeconomic Model RIMINI

Abstract

The Inflation Report’s projections for economic developments are important for Norges Bank’s conduct of monetary policy. The macroeconomic model RIMINI is used as a tool in developing these projections. This article provides insight into key aspects of the model’s description of the inflation mechanism and how the model is used to make economic forecasts. Assessments and judgement play an important role in this work. The assessments are partly based on systematic analysis of current statistics and information from other models that shed light on temporary factors. Historical forecast errors also provide insight into the use of the model. Knowledge of this kind provides the basis for steering the model in the forecast period. The article also illustrates how the model may be used to study effects of interest rate changes.