A trade-off criterion for evaluating effectiveness and reliability of alternative policy actions
The evaluation of policy actions by means of macroeconomic models often begins with the analysis of multipliers. A rough analysis recommends to use those instruments that exhibit large multipliers. Government budget usually imposes some constraints on the policy action. Insted of the raw multiplier, a trade-off criterion could measure the effect of a variation of the instrument associated with a given cost in terms of government deficit. The trade-off criterion can be computed from the macroeconomic model, and this paper shows how to associate a standard error to the point estimate, thus providing a measurement of reliability of the policy instrument.
|Date of creation:||1988|
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- Amemiya, Takeshi, 1983. "Non-linear regression models," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 1, chapter 6, pages 333-389 Elsevier.
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"Analyse et mesure de l'incertitude en prevision d'un modele econometrique. Application au modele mini-DMS
[Analysis and measurement of forecast uncertainty in an econometric model. Application to m," MPRA Paper 22565, University Library of Munich, Germany, revised 1984.
- James M. Brundy & Dale W. Jorgenson, 1971. "Efficient estimation of simultaneous equations by instrumental variables," Working Papers in Applied Economic Theory 3, Federal Reserve Bank of San Francisco.
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