Info-Gap Economics An Operational Introduction

by Ben-Haim, Yakov

• ISBN13: 9780230228047
• ISBN10: 0230228046
• Format: Hardcover
• Copyright: 2010-05-15
• Publisher: Palgrave Macmillan

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

Preface	p. x
Getting Started	p. 1
Info-Gap Theory in Plain English	p. 3
Can Models Help?	p. 3
Elements of Info-Gap Theory	p. 6
Implications of Info-Gap Theory	p. 9
Applications of Info-Gap Theory	p. 11
A First Look: Stylized Example	p. 15
Problem Formulation	p. 16
Robustness	p. 17
Formulation and Derivation	p. 17
Trade-Off and Zeroing	p. 19
Preference Reversal	p. 20
What Do the Numbers Mean?	p. 21
Opportuneness	p. 22
Formulation	p. 22
Interpretation	p. 23
Economic Decisions	p. 27
Monetary Policy	p. 29
Taylor Rule for Interest Rates	p. 29
Policy Preview	p. 30
Operational Preview	p. 30
Formulation	p. 31
Uncertainty, Performance and Robustness	p. 33
Policy Exploration	p. 35
Expectations, Communication and Credibility	p. 41
Policy Preview	p. 43
Operational Preview	p. 44
Dynamics and Expectations	p. 45
Uncertainty and Robustness	p. 47
Policy Exploration	p. 49
Shocks, Expectations and Credibility	p. 56
Policy Preview	p. 56
Operational Preview	p. 57
Dynamics and Expectations	p. 58
Uncertainty and Robustness	p. 59
Policy Exploration	p. 61
Credibility and Interacting Agents	p. 65
Policy Preview	p. 66
Operational Preview	p. 67
Dynamics and Expectations	p. 68
Uncertainty and Robustness	p. 70
Policy Exploration	p. 72
Extensions	p. 77
Appendix: Auto-Regressive Representation of the Rudebusch-Svensson Model	p. 78
Appendix: Derivation of Expectation Coefficients	p. 79
Appendix: Derivation of Inverse 1-Step Robustnesses	p. 80
Financial Stability	p. 87
Structured Securities: Simple Example	p. 87
Policy Preview	p. 88
Operational Preview	p. 88
Formulation	p. 89
Uncertainty Model	p. 90
Robustness Functions	p. 91
Policy Exploration	p. 92
Extensions	p. 94
Value at Risk in Financial Economics	p. 95
Policy Preview	p. 97
Operational Preview	p. 98
Value at Risk: Formulation	p. 98
Uncertainty Model: Fat Tails	p. 99
Performance and Robustness	p. 101
Safety Factor and Incremental VaR	p. 103
Policy Exploration	p. 104
Robustness with Uncertain Normal Distributions	p. 110
Extensions	p. 113
Stress Testing: Suite of Models	p. 115
Suite of Models and their Uncertainties	p. 116
Shocks and their Uncertainties	p. 118
Embedding a Stress Test	p. 119
Strategic Asset Allocation	p. 120
Policy Preview	p. 121
Operational Preview	p. 121
Budget Constraint	p. 122
Uncertainty	p. 123
Performance and Robustness	p. 124
Opportuneness Function	p. 125
Policy Exploration	p. 127
Extensions	p. 131
Appendix: Derivation of an Info-Gap Model	p. 132
Topics in Public Policy	p. 135
Emissions Compliance	p. 135
Policy Preview	p. 136
Operational Preview	p. 137
Welfare Loss: Formulation	p. 137
Uncertainty	p. 139
Robustness	p. 140
Policy Exploration	p. 142
Extensions	p. 149
Enforcing Pollution Limits	p. 150
Policy Preview	p. 150
Operational Preview	p. 151
Economic Model	p. 152
Uncertainty and Robustness	p. 156
Policy Exploration	p. 158
Extensions	p. 164
Climate Change	p. 165
Policy Preview	p. 166
Operational Preview	p. 166
System Model	p. 167
Performance Requirement	p. 168
Uncertainty Models	p. 169
Robustness	p. 170
Policy Exploration	p. 172
Extensions	p. 176
Appendix: Derivation of Eq.(5.19)	p. 177
Appendix: Derivation of Eq.(5.22)	p. 178
Estimation and Forecasting	p. 179
Regression Prediction	p. 179
Policy Preview	p. 181
Operational Preview	p. 181
Regression and Robustness	p. 182
Policy Exploration	p. 185
Extensions	p. 188
Auto-Regression and Data Revision	p. 189
Policy Preview	p. 190
Operational Preview	p. 190
Auto-Regression	p. 190
Uncertainty and Robustness	p. 191
Policy Exploration	p. 193
Confidence Intervals	p. 197
Policy Preview	p. 197
Operational Preview	p. 197
Formulating the Confidence Interval	p. 198
Uncertainty and Robustness	p. 200
Policy Exploration	p. 202
Extension	p. 208
Appendix: Least Squares Regression Coefficients for Section 6.1	p. 209
Appendix: Mean Squared Error for Section 6.2	p. 209
Wrapping Up	p. 211
The Art of Uncertainty Modelling	p. 213
Uncertain Parameters	p. 214
Certainty	p. 214
Fractional Error	p. 214
Fractional Error with Bounds	p. 217
Calibrated Fractional Error	p. 218
Discrete Probability Distributions	p. 219
Uncertain Function	p. 220
Envelope Bound	p. 221
Slope Bound	p. 222
Auto-Regressive Functions	p. 225
Extensions	p. 226
Positivism, F-twist, and Robust-Satisficing	p. 227
Friedman and Samuelson	p. 228
Shackle-Popper Indeterminism	p. 230
Methodological Implications	p. 231
References	p. 233
Author Index	p. 241
Subjec Index	p. 244
Table of Contents provided by Ingram. All Rights Reserved.