Ray C. Fair and Lewis S. Alexander
- Published in print:
- 1991
- Published Online:
- October 2011
- ISBN:
- 9780195057720
- eISBN:
- 9780199854967
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780195057720.003.0006
- Subject:
- Economics and Finance, Econometrics
This chapter compares the predictive accuracy of the Michigan and Fair econometric models using the method developed in Ray Fair. These models are compared to each other and to an eighth-order ...
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This chapter compares the predictive accuracy of the Michigan and Fair econometric models using the method developed in Ray Fair. These models are compared to each other and to an eighth-order autoregressive model. The method accounts for the four main sources of uncertainty of an economic forecast: uncertainty due to the error terms, the coefficient estimates, the exogenous variables, and the possible misspecification of the model. Because it accounts for these four sources, it can be used to make comparisons across models. The method has been used to compare the Fair model to autoregressive models, vector autoregressive models, Thomas Sargent's classical macroeconomic model, and a small linear model, but this is the first time it has been used to compare two relatively large structural models. The chapter's primary aim is to demonstrate the application of the comparison method to large models.Less
This chapter compares the predictive accuracy of the Michigan and Fair econometric models using the method developed in Ray Fair. These models are compared to each other and to an eighth-order autoregressive model. The method accounts for the four main sources of uncertainty of an economic forecast: uncertainty due to the error terms, the coefficient estimates, the exogenous variables, and the possible misspecification of the model. Because it accounts for these four sources, it can be used to make comparisons across models. The method has been used to compare the Fair model to autoregressive models, vector autoregressive models, Thomas Sargent's classical macroeconomic model, and a small linear model, but this is the first time it has been used to compare two relatively large structural models. The chapter's primary aim is to demonstrate the application of the comparison method to large models.
Jean-Pascal Bénassy
- Published in print:
- 2011
- Published Online:
- April 2015
- ISBN:
- 9780195387711
- eISBN:
- 9780190261405
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:osobl/9780195387711.003.0018
- Subject:
- Economics and Finance, Macro- and Monetary Economics
This chapter tackles the problem of the stabilization policies of governments that emerge as responses to shocks on the economy. It describes the current trend of using microfounded models for policy ...
More
This chapter tackles the problem of the stabilization policies of governments that emerge as responses to shocks on the economy. It describes the current trend of using microfounded models for policy analysis. It provides two examples of optimal policies with microfounded models: optimal seigniorage under uncertainty and the non-Walrasian “policy effectiveness” of Thomas Sargent and Neil Wallace. It looks into how government policy design avoids fiscal and monetary policies that create indeterminacies and therefore instability, and concentrates on monetary interest rate rules. It also highlights the Pigou effect and how the effect determines simple rules guaranteeing global determinacy.Less
This chapter tackles the problem of the stabilization policies of governments that emerge as responses to shocks on the economy. It describes the current trend of using microfounded models for policy analysis. It provides two examples of optimal policies with microfounded models: optimal seigniorage under uncertainty and the non-Walrasian “policy effectiveness” of Thomas Sargent and Neil Wallace. It looks into how government policy design avoids fiscal and monetary policies that create indeterminacies and therefore instability, and concentrates on monetary interest rate rules. It also highlights the Pigou effect and how the effect determines simple rules guaranteeing global determinacy.
