power are given greater weight in the the models are grouped into three classes : factor models, indicator models and var models. the models within each class may contain different variables or be variants of one another. for a detailed discussion, see aastveit, k. a, k. gerdrup, a. s. jore ( 2011 ) “ short - term forecasting of gdp and inflation in real time : norges bank ’ s system for averaging models ”, staff memo 9 / 2011, norges bank bis central bankers ’ speeches subsequent round. the bank has a similar system including almost 250 models for forecasting mainland gdp. the projections from these systems of models extend four quarters ahead in time and are published at regular intervals on the bank ’ s website. we call this apparatus sam ( system for averaging models ). for projections with slightly longer horizons, the bank parts company with weather forecasters. while meteorologists are unlikely to influence the weather with their predictions, norges bank ’ s interest rate setting can actually influence economic developments in the medium term. this places particular demands on the system of analysis and involves other demands than if the sole purpose were to make forecasts. norges bank has developed the norwegian economy model ( nemo ), which we use as an aid when drawing up one - yearahead to four - year - ahead forecasts. nemo is a model for analysing fluctuations in the norwegian economy around a long - term trend. in the medium term, the economy may in periods deviate substantially from trend, referred to as cyclical fluctuations. when the fluctuations subside, we must assume that the economy is moving towards equilibrium. the long - term trend is not determined by monetary policy, but by assumptions regarding technological developments and the supply of labour and capital. when we set the interest rate, we give weight to both the current situation and the outlook two to three years ahead. the statistical models help us understand the current situation, while the equilibrium properties frame the analysis. nemo describes how the interest rate can be set to bring the economy from its current starting - point back to the long - term equilibrium path. as a support tool in making monetary policy decisions, such a model apparatus is thus particularly relevant. i will come back to the main features of nemo later. as i mentioned earlier, norges bank operates under a formal monetary policy mandate. the bank ’ s objective is to stabilise inflation and provide the economy with a nominal anchor.

øystein olsen : use of models and economic theory in norges bank lecture by mr øystein olsen, governor of norges bank ( central bank of norway ), at the department of economics, university of oslo, oslo, 8 september 2011. * * * the lecture is based on previous speeches and newspaper articles. a brief comment on recent developments is included in the final section. please note that the text below may differ slightly from the actual presentation. allow me to start by thanking you for your invitation to give this year ’ s schweigaard lecture. anton martin schweigaard was one of the leading statesmen of 19th century norway. he was a jurist, a politician and an economist. although “ revival of productive forces ” and “ expansion of national wealth ” were to schweigaard important objectives for economic policy, most important was the promotion of “ moral progress ”, “ public decency ” and “ the perfection of political and legal institutions ”. 1 i doubt that schweigaard was always impressed by the perfection of political institutions, perhaps in particular the institution of norges bank. schweigaard grew up in modest circumstances in the small market town of kragerø on the coast of southern norway – a town severely affected by the british blockade of norway during denmark - norway ’ s involvement in the napoleonic wars in the early 1800s. norges bank was established in 1816, the year after the wars ended. the storting decided that a compulsory silver tax would be levied to provide capital for norges bank. schweigaard ’ s brother wrote2 : “ when the compulsory payment to norges bank came in addition – anton and i witnessed our parents ’ silverware and gold ornaments being melted down to pay the tax – it is easy to understand that many of the town ’ s inhabitants found it difficult to make ends meet, which unfortunately was also the case with my parents and grandmother, and times were hard. ” but schweigaard was a talented man and it was said that he had probably never been as happy as when he passed his examen artium with flying colours and was admitted here to the university of christiania. i expect that as you embark on your economics studies, you will get down to business with the same energy and enthusiasm as schweigaard did then. i expect you will learn that economics is not a perfect subject. but i know that the study of economics will