There are no sharp dividing lines between these horizons. Nonetheless, the time horizon imposes various requirements on economic theory and models for our purposes. The starting-point for the analyses is important. Current statistics and anecdotal information can serve as a basis for providing some indication of how the economy has evolved up to the present. But the information set is uncertain. Statistics are published with a lag and are often revised. Data from different sources can provide different pictures of the situation at hand. Statistical models can provide us with good support and help distinguish between news and noise in the data. They can capture time series properties in data and correlations that in many cases will be able to produce good forecasts of developments in the months ahead. There are certain similarities between projecting developments in the Norwegian economy in the coming months and forecasting the weather. Meteorologists have observed that averaging forecasts from a large number of models generally produces more accurate forecasts. To project consumer price inflation in the coming quarters, the Bank has developed a system for averaging forecasts from about 170 different statistical models, all of which are intended to project inflation in the Norwegian economy in the very near term.3 The model weights are determined on the basis of historical accuracy and are continually adjusted so that models with better predictive power are given greater weight in the  3  The models are grouped into three classes: factor models, indicator models and VAR models.

Actually, one essential objective of macroprudential supervision may be to "regulate" (not in the legal sense, but economically) the aggregate level of risk appetite inside the financial system. This unavoidably involves some degree of discretionary judgement and intervention. Combining the two components of macrosupervision (systemic and macroeconomic) with the two approaches (automatic and discretionary) produces an interesting classification, which is presented in the table below:  BIS Review 37/2009  3  Purpose Systemic risk  Adjustment to macroconditions  Mechanisms • buffers (capital and/or liquidity) • Loan to Value ratios Automatic  • accounting framework • stress tests  Discretionary  • pillar II of Basel 2  • time varying ratios  capital  • dynamic provisioning  • discretionary adjustments to capital ratios, provisions or margin requirements  Institutional challenges The discretionary approach to macrosupervision raises important institutional issues. First, who makes the judgment? And should that body be independent or not? There is a good case for putting Central Banks in charge. If one takes an historical perspective, it is striking that the mandates and missions of Central Banks have taken major turns following financial crises. Central Banks have an informational advantage (or at least no disadvantage) in judging the cyclical position. They have an incentive to act, because macroprudential supervision alleviates the burden on monetary policy, and because they need monetary transmission mechanisms to work. So they clearly should have a pivotal role in the process. But they are not alone in caring about financial stability.