Olivier Pilmis
- Published in print:
- 2018
- Published Online:
- August 2018
- ISBN:
- 9780198820802
- eISBN:
- 9780191860430
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/oso/9780198820802.003.0006
- Subject:
- Business and Management, Political Economy
Economic crises regularly give rise to criticisms of economists and forecasters for having failed to blow the whistle. Forecasters’ efforts to deal with ‘errors’ and events that contradict their ...
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Economic crises regularly give rise to criticisms of economists and forecasters for having failed to blow the whistle. Forecasters’ efforts to deal with ‘errors’ and events that contradict their predictions show analogies between forecasting and magic as analysed by Henri Hubert and Marcel Mauss in the early twentieth century. The way forecasters depict the process of forecast production pinpoints three different sets of explanations for errors that together seek to discard ‘reality’ (‘what actually happened’) as a relevant criterion for judging forecasts (‘what had been predicted’). Forecasters argue that the ontological indeterminacy of economies and the presence of unanticipated shocks absolve them from blame; they emphasize the value of identifying causal narratives and scenarios even when point forecasts are wrong; and they stress the importance of adhering to professional methods or rituals.Less
Economic crises regularly give rise to criticisms of economists and forecasters for having failed to blow the whistle. Forecasters’ efforts to deal with ‘errors’ and events that contradict their predictions show analogies between forecasting and magic as analysed by Henri Hubert and Marcel Mauss in the early twentieth century. The way forecasters depict the process of forecast production pinpoints three different sets of explanations for errors that together seek to discard ‘reality’ (‘what actually happened’) as a relevant criterion for judging forecasts (‘what had been predicted’). Forecasters argue that the ontological indeterminacy of economies and the presence of unanticipated shocks absolve them from blame; they emphasize the value of identifying causal narratives and scenarios even when point forecasts are wrong; and they stress the importance of adhering to professional methods or rituals.
C. Cardinali
- Published in print:
- 2014
- Published Online:
- March 2015
- ISBN:
- 9780198723844
- eISBN:
- 9780191791185
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780198723844.003.0006
- Subject:
- Physics, Geophysics, Atmospheric and Environmental Physics
This chapter describes the concept of forecast error sensitivity to observations (FSO) and its use for diagnostic purposes. Assessment of the observational contribution to analysis and forecasting is ...
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This chapter describes the concept of forecast error sensitivity to observations (FSO) and its use for diagnostic purposes. Assessment of the observational contribution to analysis and forecasting is among the most challenging aspects of diagnostics in data assimilation and numerical weather prediction. The FSO tool computes the contribution of all observations to the forecast error: a positive contribution is associated with an increase in forecast error and a negative contribution with a decrease. The technique is illustrated by an application to the weather prediction system of the European Centre for Medium-Range Weather Forecasts.Less
This chapter describes the concept of forecast error sensitivity to observations (FSO) and its use for diagnostic purposes. Assessment of the observational contribution to analysis and forecasting is among the most challenging aspects of diagnostics in data assimilation and numerical weather prediction. The FSO tool computes the contribution of all observations to the forecast error: a positive contribution is associated with an increase in forecast error and a negative contribution with a decrease. The technique is illustrated by an application to the weather prediction system of the European Centre for Medium-Range Weather Forecasts.
Eric Barthalon
- Published in print:
- 2014
- Published Online:
- November 2015
- ISBN:
- 9780231166287
- eISBN:
- 9780231538305
- Item type:
- chapter
- Publisher:
- Columbia University Press
- DOI:
- 10.7312/columbia/9780231166287.003.0007
- Subject:
- Economics and Finance, Behavioural Economics
This chapter illustrates the dynamic properties of the HRL formulation by means of a detailed numerical example based on the hyperinflation observed in Zimbabwe between 2000 and 2008. It first ...
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This chapter illustrates the dynamic properties of the HRL formulation by means of a detailed numerical example based on the hyperinflation observed in Zimbabwe between 2000 and 2008. It first presents the results of dynamic equilibrium and dynamic disequilibrium simulations. It shows that the perceived rate of inflation converged asymptotically toward the instantaneous rate of inflation. This asymptotic convergence happens because the rate of memory decay grows exponentially and the elasticity of the perceived rate of inflation with respect to the instantaneous rate of inflation converges toward unity. The duration of the memory of inflation is also computed, along with the distribution of forecasting errors in the HRL formulation. Finally, the chapter examines how the HRL formulation sheds light on what Charles P. Kindleberger calls “some historical puzzles in macroeconomic behavior”.Less
This chapter illustrates the dynamic properties of the HRL formulation by means of a detailed numerical example based on the hyperinflation observed in Zimbabwe between 2000 and 2008. It first presents the results of dynamic equilibrium and dynamic disequilibrium simulations. It shows that the perceived rate of inflation converged asymptotically toward the instantaneous rate of inflation. This asymptotic convergence happens because the rate of memory decay grows exponentially and the elasticity of the perceived rate of inflation with respect to the instantaneous rate of inflation converges toward unity. The duration of the memory of inflation is also computed, along with the distribution of forecasting errors in the HRL formulation. Finally, the chapter examines how the HRL formulation sheds light on what Charles P. Kindleberger calls “some historical puzzles in macroeconomic behavior”.
M. Hashem Pesaran
- Published in print:
- 2015
- Published Online:
- March 2016
- ISBN:
- 9780198736912
- eISBN:
- 9780191800504
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780198736912.003.0024
- Subject:
- Economics and Finance, Econometrics
This chapter first introduces impulse response analysis and forecast error variance decomposition for unrestricted vector autoregressive (VAR) models and discusses the orthogonalized and generalized ...
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This chapter first introduces impulse response analysis and forecast error variance decomposition for unrestricted vector autoregressive (VAR) models and discusses the orthogonalized and generalized impulse response functions. It then considers the identification problem of short-run effects in a structural VAR model. It reviews Sims' approach and investigates the identification problem of a structural model when one or more of the structural shocks have permanent effects. Exercises are provided at the end of the chapter.Less
This chapter first introduces impulse response analysis and forecast error variance decomposition for unrestricted vector autoregressive (VAR) models and discusses the orthogonalized and generalized impulse response functions. It then considers the identification problem of short-run effects in a structural VAR model. It reviews Sims' approach and investigates the identification problem of a structural model when one or more of the structural shocks have permanent effects. Exercises are provided at the end of the chapter.
Eric Barthalon
- Published in print:
- 2014
- Published Online:
- November 2015
- ISBN:
- 9780231166287
- eISBN:
- 9780231538305
- Item type:
- chapter
- Publisher:
- Columbia University Press
- DOI:
- 10.7312/columbia/9780231166287.003.0012
- Subject:
- Economics and Finance, Behavioural Economics
This book concludes by summarizing the key arguments in the form of a comparison of the HRL formulation with the rational expectations hypothesis (REH). It explains what makes Maurice Allais's ...
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This book concludes by summarizing the key arguments in the form of a comparison of the HRL formulation with the rational expectations hypothesis (REH). It explains what makes Maurice Allais's contribution original, important, and modern. To start with, many of the rational expectations theorists' criticisms of standard adaptive expectations do not apply to the HRL formulation. The HRL formulation is much more sophisticated and much more rational than the standard adaptive expectations model tolerated by the REH advocates when economic variables are interdependent. Furthermore, the variability of the rate of memory decay is endogenous both to economic agents and to the environment they are responding to. Parsimony, nonlinearity and time variability of the gain, unequal weighting of past observations according to a well-specified and stable law of forgetting, absence of patterns in forecasting errors—these are the features that make Allais's HRL formulation worth the consideration of economists wishing to explore or to revisit the unsettled and important question of “expectations” formation.Less
This book concludes by summarizing the key arguments in the form of a comparison of the HRL formulation with the rational expectations hypothesis (REH). It explains what makes Maurice Allais's contribution original, important, and modern. To start with, many of the rational expectations theorists' criticisms of standard adaptive expectations do not apply to the HRL formulation. The HRL formulation is much more sophisticated and much more rational than the standard adaptive expectations model tolerated by the REH advocates when economic variables are interdependent. Furthermore, the variability of the rate of memory decay is endogenous both to economic agents and to the environment they are responding to. Parsimony, nonlinearity and time variability of the gain, unequal weighting of past observations according to a well-specified and stable law of forgetting, absence of patterns in forecasting errors—these are the features that make Allais's HRL formulation worth the consideration of economists wishing to explore or to revisit the unsettled and important question of “expectations” formation.
