Mathematical Models and Economic Forecasting: Some Uses and Mis-Uses of Mathematics in Economics
AbstractWe consider three 'cases studies' of the uses and mis-uses of mathematics in economics and econometrics.� The first concerns economic forecasting, where a mathematical analysis is essential, and is independent of the specific forecasting model and how the process being forecast behaves.� The second concerns model selection with more candidate variables than the number of observations.� Again, an understanding of the properties of extended general-to-specific procedures is impossible without advanced mathematical analysis.� The third concerns inter-temporal optimization and the formation of 'rational expectations', where misleading results follow from present mathematical approaches for realistic economies.� The appropriate mathematics remains to be developed, and may end 'problem specific' rather than generic.
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Bibliographic InfoPaper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 530.
Date of creation: 01 Feb 2011
Date of revision:
Economic forecasting; structural breaks; model selection; expectations; impulse-indicator saturation; mathematical analyses;
Find related papers by JEL classification:
- C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-02-19 (All new papers)
- NEP-CBA-2011-02-19 (Central Banking)
- NEP-CIS-2011-02-19 (Confederation of Independent States)
- NEP-ECM-2011-02-19 (Econometrics)
- NEP-ETS-2011-02-19 (Econometric Time Series)
- NEP-FOR-2011-02-19 (Forecasting)
- NEP-HPE-2011-02-19 (History & Philosophy of Economics)
- NEP-PKE-2011-02-19 (Post Keynesian Economics)
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