By Lars Peter Hansen
The traditional concept of determination making below uncertainty advises the choice maker to shape a statistical version linking results to judgements after which to decide on the optimum distribution of results. This assumes that the choice maker trusts the version thoroughly. yet what should still a call maker do if the version can't be relied on? Lars Hansen and Thomas Sargent, major macroeconomists, push the sector ahead as they set approximately answering this query. They adapt powerful regulate concepts and observe them to economics. through the use of this conception to permit selection makers recognize misspecification in fiscal modeling, the authors improve purposes to quite a few difficulties in dynamic macroeconomics. Technical, rigorous, and self-contained, this e-book may be beneficial for macroeconomists who search to enhance the robustness of decision-making approaches.
Read Online or Download Robustness PDF
Similar macroeconomics books
This quantity is part of a learn venture initiated and financed via the realm financial institution entitled "Macroeconomic rules, challenge, and progress within the lengthy Run," which concerned experiences of the macroeconomic histories of eighteen nations as they tried to take care of financial balance within the face of overseas expense, rate of interest, and insist shocks or household crises within the different types of funding books and comparable budgetary difficulties.
4 stylised evidence of combination fiscal progress are arrange firstly. the expansion method is interpreted to symbolize transitional dynamics instead of balanced-growth equilibria. by contrast historical past, the elemental value of subsistence intake is comprehensively analysed. thus, the which means of the productive-consumption speculation for the intertemporal intake trade-off and the expansion technique is investigated.
On the outbreak of the worldwide monetary situation, 2008, the G20 was once greatly stated as supporting hinder an excellent extra critical decline within the international financial system. It helped to calm the panic in monetary markets and articulate a collection of attainable coverage suggestions to revive worldwide balance and progress. besides the fact that, because the dual-track restoration set in, coverage ideas for complex economies and EMEs diverged.
- Determinants of Bank Involvement with SMEs: A Survey of Demand-Side and Supply-Side Factors (SpringerBriefs in Finance)
- The Measurement of Capital: Theory and Practice
- Rationality at Work: Logics of Collective Action in the Labour Market
- NBER International Seminar on Macroeconomics 2005
- Politics as Usual: What Lies Behind the Pro-Poor Rhetoric
Additional info for Robustness
2. Certainty equivalence. 6 ), the scalar p = β 1−β traceP CC . The volatility matrix C inﬂuences the value function through p, but not through P . 9 ) that the optimal decision rule F is independent of the volatility matrix C . 1 ), we have normalized C by setting Eˇt ˇt = I . Therefore, the matrix C determines the covariance matrix CC of random shocks impinging on the system. The ﬁnding that F is independent of the volatility matrix C is known as the certainty equivalence principle: the same decision rule ut = −F yt emerges from stochastic (C = 0) and nonstochastic (C = 0) versions of the problem.
Y0 ]. 4 ) as a statistical measure of the discrepancy between the distorted and approximating models. The alternative models diﬀer from the approximating model by having shock processes whose conditional means are not zero and that can feed back in potentially complicated ways on the history of the state. Notice that our speciﬁcation leaves the conditional volatility of the shock, as parameterized by C , unchanged. We adopt this speciﬁcation for computational convenience. We show in chapter 3 the useful result that our calculations for a worstcase conditional mean wt+1 remain unaltered when we also allow conditional volatilities C to diﬀer in the approximating and perturbed models.
4) where ∗ denotes next period’s value, and ∼ N (0, I). 3 ) the decision maker pretends that a malevolent nature chooses a feedback rule for a model misspeciﬁcation process w. 4 ). 2 ), we mention a kind of certainty equivalence that applies to the multiplier problem. 1. Modiﬁed certainty equivalence principle On page 29, we stated a certainty equivalence principle that applies to the linear quadratic dynamic programming problem without concern for model misspeciﬁcation. It fails to hold when there is concern about model misspeciﬁcation.