9780230228047

Info-Gap Economics An Operational Introduction

by
  • ISBN13:

    9780230228047

  • ISBN10:

    0230228046

  • Format: Hardcover
  • Copyright: 2010-05-15
  • Publisher: Palgrave Macmillan
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  • The New copy of this book will include any supplemental materials advertised. Please check the title of the book to determine if it should include any access cards, study guides, lab manuals, CDs, etc.

Summary

After every crisis economists and policy analysts ask: can better models help prevent such situations? This book is an answer. Yes, quantitative models can help if we remember that they are rough approximations to a complex reality.

Author Biography

Yakov Ben-Haim holds the Yitzhak Moda'i Chair in Technology and Economics at the Technion-Israel Institute of Technology. He has authored five books and many articles.

Table of Contents

Prefacep. x
Getting Startedp. 1
Info-Gap Theory in Plain Englishp. 3
Can Models Help?p. 3
Elements of Info-Gap Theoryp. 6
Implications of Info-Gap Theoryp. 9
Applications of Info-Gap Theoryp. 11
A First Look: Stylized Examplep. 15
Problem Formulationp. 16
Robustnessp. 17
Formulation and Derivationp. 17
Trade-Off and Zeroingp. 19
Preference Reversalp. 20
What Do the Numbers Mean?p. 21
Opportunenessp. 22
Formulationp. 22
Interpretationp. 23
Economic Decisionsp. 27
Monetary Policyp. 29
Taylor Rule for Interest Ratesp. 29
Policy Previewp. 30
Operational Previewp. 30
Formulationp. 31
Uncertainty, Performance and Robustnessp. 33
Policy Explorationp. 35
Expectations, Communication and Credibilityp. 41
Policy Previewp. 43
Operational Previewp. 44
Dynamics and Expectationsp. 45
Uncertainty and Robustnessp. 47
Policy Explorationp. 49
Shocks, Expectations and Credibilityp. 56
Policy Previewp. 56
Operational Previewp. 57
Dynamics and Expectationsp. 58
Uncertainty and Robustnessp. 59
Policy Explorationp. 61
Credibility and Interacting Agentsp. 65
Policy Previewp. 66
Operational Previewp. 67
Dynamics and Expectationsp. 68
Uncertainty and Robustnessp. 70
Policy Explorationp. 72
Extensionsp. 77
Appendix: Auto-Regressive Representation of the Rudebusch-Svensson Modelp. 78
Appendix: Derivation of Expectation Coefficientsp. 79
Appendix: Derivation of Inverse 1-Step Robustnessesp. 80
Financial Stabilityp. 87
Structured Securities: Simple Examplep. 87
Policy Previewp. 88
Operational Previewp. 88
Formulationp. 89
Uncertainty Modelp. 90
Robustness Functionsp. 91
Policy Explorationp. 92
Extensionsp. 94
Value at Risk in Financial Economicsp. 95
Policy Previewp. 97
Operational Previewp. 98
Value at Risk: Formulationp. 98
Uncertainty Model: Fat Tailsp. 99
Performance and Robustnessp. 101
Safety Factor and Incremental VaRp. 103
Policy Explorationp. 104
Robustness with Uncertain Normal Distributionsp. 110
Extensionsp. 113
Stress Testing: Suite of Modelsp. 115
Suite of Models and their Uncertaintiesp. 116
Shocks and their Uncertaintiesp. 118
Embedding a Stress Testp. 119
Strategic Asset Allocationp. 120
Policy Previewp. 121
Operational Previewp. 121
Budget Constraintp. 122
Uncertaintyp. 123
Performance and Robustnessp. 124
Opportuneness Functionp. 125
Policy Explorationp. 127
Extensionsp. 131
Appendix: Derivation of an Info-Gap Modelp. 132
Topics in Public Policyp. 135
Emissions Compliancep. 135
Policy Previewp. 136
Operational Previewp. 137
Welfare Loss: Formulationp. 137
Uncertaintyp. 139
Robustnessp. 140
Policy Explorationp. 142
Extensionsp. 149
Enforcing Pollution Limitsp. 150
Policy Previewp. 150
Operational Previewp. 151
Economic Modelp. 152
Uncertainty and Robustnessp. 156
Policy Explorationp. 158
Extensionsp. 164
Climate Changep. 165
Policy Previewp. 166
Operational Previewp. 166
System Modelp. 167
Performance Requirementp. 168
Uncertainty Modelsp. 169
Robustnessp. 170
Policy Explorationp. 172
Extensionsp. 176
Appendix: Derivation of Eq.(5.19)p. 177
Appendix: Derivation of Eq.(5.22)p. 178
Estimation and Forecastingp. 179
Regression Predictionp. 179
Policy Previewp. 181
Operational Previewp. 181
Regression and Robustnessp. 182
Policy Explorationp. 185
Extensionsp. 188
Auto-Regression and Data Revisionp. 189
Policy Previewp. 190
Operational Previewp. 190
Auto-Regressionp. 190
Uncertainty and Robustnessp. 191
Policy Explorationp. 193
Confidence Intervalsp. 197
Policy Previewp. 197
Operational Previewp. 197
Formulating the Confidence Intervalp. 198
Uncertainty and Robustnessp. 200
Policy Explorationp. 202
Extensionp. 208
Appendix: Least Squares Regression Coefficients for Section 6.1p. 209
Appendix: Mean Squared Error for Section 6.2p. 209
Wrapping Upp. 211
The Art of Uncertainty Modellingp. 213
Uncertain Parametersp. 214
Certaintyp. 214
Fractional Errorp. 214
Fractional Error with Boundsp. 217
Calibrated Fractional Errorp. 218
Discrete Probability Distributionsp. 219
Uncertain Functionp. 220
Envelope Boundp. 221
Slope Boundp. 222
Auto-Regressive Functionsp. 225
Extensionsp. 226
Positivism, F-twist, and Robust-Satisficingp. 227
Friedman and Samuelsonp. 228
Shackle-Popper Indeterminismp. 230
Methodological Implicationsp. 231
Referencesp. 233
Author Indexp. 241
Subjec Indexp. 244
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