IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper

Policy evaluation in uncertain economic environments

  • Brock,W.A.
  • Durlauf,S.N.
  • West,K.D.

    (University of Wisconsin-Madison, Social Systems Research Institute)

This paper develops a decision-theoretic approach to policy analysis. We argue that policy evaluation should be conducted on the basis of two factors: the policymaker's preferences, and the conditional distribution of the outcomes of interest given a policy and available information. From this perspective, the common practice of conditioning on a particular model is often inappropriate, since model uncertainty is an important element of policy evaluation. We advocate the use of model averaging to account for model uncertainty and show how it may be applied to policy evaluation exercises. We illustrate our approach with applications to monetary policy and to growth policy.

(This abstract was borrowed from another version of this item.)

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.ssc.wisc.edu/econ/archive/wp2003-15%20a.pdf
Download Restriction: no

File URL: http://www.ssc.wisc.edu/econ/archive/wp2003-15%20b.pdf
Download Restriction: no

File URL: http://www.ssc.wisc.edu/econ/archive/wp2003-15%20c.pdf
Download Restriction: no

File URL: http://www.ssc.wisc.edu/econ/archive/wp2003-15%20d.pdf
Download Restriction: no

File URL: http://www.ssc.wisc.edu/econ/archive/wp2003-15%20e.pdf
Download Restriction: no

Paper provided by Wisconsin Madison - Social Systems in its series Working papers with number 15.

as
in new window

Length:
Date of creation: 2003
Date of revision:
Handle: RePEc:att:wimass:200315
Contact details of provider: Postal:
UNIVERSITY OF WISCONSIN MADISON, SOCIAL SYSTEMS RESEARCH INSTITUTE(S.S.R.I.), MADISON WISCONSIN 53706 U.S.A.

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Carmen Fernandez & Eduardo Ley & Mark F.J. Steel, 1998. "Benchmark Priors for Bayesian Model Averaging," Econometrics 9804001, EconWPA, revised 31 Jul 1999.
  2. Bernhard, Pierre, 2002. "Survey Of Linear Quadratic Robust Control," Macroeconomic Dynamics, Cambridge University Press, vol. 6(01), pages 19-39, February.
  3. McAleer, Michael & Pagan, Adrian R & Volker, Paul A, 1985. "What Will Take the Con out of Econometrics?," American Economic Review, American Economic Association, vol. 75(3), pages 293-307, June.
  4. Alexei Onatski & Noah Williams, 2003. "Modeling Model Uncertainty," NBER Working Papers 9566, National Bureau of Economic Research, Inc.
  5. Glenn D. Rudebusch & Lars E. O. Svensson, 1998. "Policy rules for inflation targeting," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
  6. Robert G. King & Ross Levine, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 717-737.
  7. Gernot Doppelhofer & Ronald I. Miller & Xavier Sala-i-Martin, 2000. "Determinants of Long-Term Growth: A Bayesian Averaging of Classical Estimates (BACE) Approach," NBER Working Papers 7750, National Bureau of Economic Research, Inc.
  8. Desdoigts, Alain, 1999. "Patterns of Economic Development and the Formation of Clubs," Journal of Economic Growth, Springer, vol. 4(3), pages 305-30, September.
  9. Durlauf, S.M. & Johnson, P.A., 1995. "Multiple Regimes and Cross-Country Growth Behavior," Working papers 9419r, Wisconsin Madison - Social Systems.
  10. Onatski, Alexei & Stock, James H., 2002. "Robust Monetary Policy Under Model Uncertainty In A Small Model Of The U.S. Economy," Macroeconomic Dynamics, Cambridge University Press, vol. 6(01), pages 85-110, February.
  11. Unknown, 1999. "Discussion," Ecological Economics, Elsevier, vol. 31(1), pages 19-21, October.
  12. Phillips, P C B, 1991. "To Criticize the Critics: An Objective Bayesian Analysis of Stochastic Trends," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 6(4), pages 333-64, Oct.-Dec..
  13. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
  14. Mccallum, Bennet T., 1988. "Robustness properties of a rule for monetary policy," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 29(1), pages 173-203, January.
  15. repec:cup:macdyn:v:6:y:2002:i:1:p:19-39 is not listed on IDEAS
  16. Temple, Jonathan, 2000. "Growth Regressions and What the Textbooks Don't Tell You," Bulletin of Economic Research, Wiley Blackwell, vol. 52(3), pages 181-205, July.
  17. Woodford Michael, 2002. "Inflation Stabilization and Welfare," The B.E. Journal of Macroeconomics, De Gruyter, vol. 2(1), pages 1-53, February.
  18. Eric M. Leeper & Christopher A. Sims & Tao Zha, 1996. "What Does Monetary Policy Do?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(2), pages 1-78.
  19. Lars Peter Hansen & Thomas J. Sargent, 2001. "Acknowledging Misspecification in Macroeconomic Theory," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(3), pages 519-535, July.
  20. Steven N. Durlauf & Danny T. Quah, 1998. "The New Empirics of Economic Growth," Working Papers 98-01-012, Santa Fe Institute.
  21. Barro, R.J., 1989. "Economic Growth In A Cross Section Of Countries," RCER Working Papers 201, University of Rochester - Center for Economic Research (RCER).
  22. Christopher A. Sims, 2002. "The Role of Models and Probabilities in the Monetary Policy Process," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 33(2), pages 1-62.
  23. Levin, Andrew T. & Williams, John C., 2003. "Robust monetary policy with competing reference models," Journal of Monetary Economics, Elsevier, vol. 50(5), pages 945-975, July.
  24. Unknown, 1999. "Discussion," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 358-366, February.
  25. Dollar, David, 1992. "Outward-Oriented Developing Economies Really Do Grow More Rapidly: Evidence from 95 LDCs, 1976-1985," Economic Development and Cultural Change, University of Chicago Press, vol. 40(3), pages 523-44, April.
  26. Kadane, Joseph B. & Chan, Ngai Hang & Wolfson, Lara J., 1996. "Priors for unit root models," Journal of Econometrics, Elsevier, vol. 75(1), pages 99-111, November.
  27. Daniel Ellsberg, 1961. "Risk, Ambiguity, and the Savage Axioms," The Quarterly Journal of Economics, Oxford University Press, vol. 75(4), pages 643-669.
  28. Unknown, 1999. "Discussion," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 286-290, February.
  29. Unknown, 1999. "Discussion," Ecological Economics, Elsevier, vol. 31(1), pages 23-29, October.
  30. Durlauf,S.N., 2000. "Econometric analysis and the study of economic growth : a skeptical perspective," Working papers 10, Wisconsin Madison - Social Systems.
  31. Curley, Shawn P. & Yates, J. Frank & Abrams, Richard A., 1986. "Psychological sources of ambiguity avoidance," Organizational Behavior and Human Decision Processes, Elsevier, vol. 38(2), pages 230-256, October.
  32. Unknown, 1999. "Discussion," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 387-390, February.
  33. Durlauf,S.N. & Kourtellos,A. & Minkin,A., 2000. "The local Solow growth model," Working papers 21, Wisconsin Madison - Social Systems.
  34. Bernard, Andrew B. & Durlauf, Steven N., 1996. "Interpreting tests of the convergence hypothesis," Journal of Econometrics, Elsevier, vol. 71(1-2), pages 161-173.
  35. Manski, Charles F., 2000. "Identification problems and decisions under ambiguity: Empirical analysis of treatment response and normative analysis of treatment choice," Journal of Econometrics, Elsevier, vol. 95(2), pages 415-442, April.
  36. Dehejia, Rajeev H., 2005. "Program evaluation as a decision problem," Journal of Econometrics, Elsevier, vol. 125(1-2), pages 141-173.
  37. Unknown, 1999. "Discussion," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 215-220, February.
  38. Unknown, 1999. "Discussion," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 422-426, February.
  39. Unknown, 1999. "Discussion," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 605-607, February.
  40. Unknown, 1999. "Discussion," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 250-254, February.
  41. Unknown, 1999. "Discussion," Ecological Economics, Elsevier, vol. 31(1), pages 31-37, October.
  42. Unknown, 1999. "Discussion," Journal of Economic Psychology, Elsevier, vol. 20(4), pages 485-489, August.
  43. Giannoni, Marc P., 2002. "Does Model Uncertainty Justify Caution? Robust Optimal Monetary Policy In A Forward-Looking Model," Macroeconomic Dynamics, Cambridge University Press, vol. 6(01), pages 111-144, February.
  44. Unknown, 1999. "Discussion," Journal of Economic Psychology, Elsevier, vol. 20(4), pages 465-483, August.
  45. Unknown, 1999. "Discussion," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 493-496, February.
  46. Unknown, 1999. "Discussion," Energy Policy, Elsevier, vol. 27(12), pages 737-742, November.
  47. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross-Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
  48. Unknown, 1999. "Discussion," Journal of Economic Psychology, Elsevier, vol. 20(4), pages 491-494, August.
  49. Chamberlain, Gary, 2000. "Econometrics and decision theory," Journal of Econometrics, Elsevier, vol. 95(2), pages 255-283, April.
  50. repec:cup:macdyn:v:6:y:2002:i:1:p:111-44 is not listed on IDEAS
  51. Costas Azariadis & Allan Drazen, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 501-526.
  52. Unknown, 1999. "Discussion," Journal of Accounting and Public Policy, Elsevier, vol. 18(2), pages 179-180.
  53. J. R. Hicks, 1940. "A Comment," Review of Economic Studies, Oxford University Press, vol. 8(1), pages 64-65.
  54. Christopher A. Sims, 1988. "Bayesian skepticism on unit root econometrics," Discussion Paper / Institute for Empirical Macroeconomics 3, Federal Reserve Bank of Minneapolis.
  55. Levine, Ross & Renelt, David, 1991. "A sensitivity analysis of cross-country growth regressions," Policy Research Working Paper Series 609, The World Bank.
  56. Unknown, 1999. "Discussion," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 572-577, February.
  57. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March.
  58. Unknown, 1999. "Discussion," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 533-536, February.
  59. Heckman, James, 2001. "Accounting for Heterogeneity, Diversity and General Equilibrium in Evaluating Social Programmes," Economic Journal, Royal Economic Society, vol. 111(475), pages F654-99, November.
  60. Unknown, 1999. "Discussion," Journal of Economic Psychology, Elsevier, vol. 20(4), pages 495-498, August.
  61. Leamer, Edward E & Leonard, Herman B, 1983. "Reporting the Fragility of Regression Estimates," The Review of Economics and Statistics, MIT Press, vol. 65(2), pages 306-17, May.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:att:wimass:200315. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ailsenne Sumwalt)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.