Uncertainty within Economic Models

Business & Finance, Economics, Econometrics, Macroeconomics
Cover of the book Uncertainty within Economic Models by Lars Peter Hansen, Thomas J Sargent, World Scientific Publishing Company
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Author: Lars Peter Hansen, Thomas J Sargent ISBN: 9789814578134
Publisher: World Scientific Publishing Company Publication: September 9, 2014
Imprint: WSPC Language: English
Author: Lars Peter Hansen, Thomas J Sargent
ISBN: 9789814578134
Publisher: World Scientific Publishing Company
Publication: September 9, 2014
Imprint: WSPC
Language: English

Written by Lars Peter Hansen (Nobel Laureate in Economics, 2013) and Thomas Sargent (Nobel Laureate in Economics, 2011), Uncertainty within Economic Models includes articles adapting and applying robust control theory to problems in economics and finance. This book extends rational expectations models by including agents who doubt their models and adopt precautionary decisions designed to protect themselves from adverse consequences of model misspecification. This behavior has consequences for what are ordinarily interpreted as market prices of risk, but big parts of which should actually be interpreted as market prices of model uncertainty. The chapters discuss ways of calibrating agents' fears of model misspecification in quantitative contexts.

Contents:

  • Introduction
  • Discounted Linear Exponential Quadratic Gaussian Control
  • Robust Permanent Income and Pricing
  • A Quartet of Semigroups for Model Specification, Robustness, Prices of Risk, and Model Detection
  • Robust Control and Model Uncertainty
  • Robust Control and Model Misspecification
  • Doubts or Variability?
  • Robust Estimation and Control without Commitment
  • Fragile Beliefs and the Price of Uncertainty
  • Beliefs, Doubts and Learning: Valuing Macroeconomic Risk
  • Three Types of Ambiguity

Readership: Graduate students; researchers and economists interested in Econometrics; Macroeconomics and Dynamic Programming.
Key Features:

  • A collection of papers adapting and applying robust control theory to problems in economics and finance
  • Brings together works by two active researchers in the field and their coauthors
  • Includes an introduction to link the papers and tell how they fit within broader efforts to improve macroeconomic and finance theories
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Written by Lars Peter Hansen (Nobel Laureate in Economics, 2013) and Thomas Sargent (Nobel Laureate in Economics, 2011), Uncertainty within Economic Models includes articles adapting and applying robust control theory to problems in economics and finance. This book extends rational expectations models by including agents who doubt their models and adopt precautionary decisions designed to protect themselves from adverse consequences of model misspecification. This behavior has consequences for what are ordinarily interpreted as market prices of risk, but big parts of which should actually be interpreted as market prices of model uncertainty. The chapters discuss ways of calibrating agents' fears of model misspecification in quantitative contexts.

Contents:

Readership: Graduate students; researchers and economists interested in Econometrics; Macroeconomics and Dynamic Programming.
Key Features:

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