Policy Evaluation in Uncertain Economic Environments / William A. Brock, Steven N. Durlauf, Kenneth D. West.

Format:

Book

Author/Creator:

Brock, William A.

Contributor:

National Bureau of Economic Research.

Durlauf, Steven N.

West, Kenneth D.

Series:

Working Paper Series (National Bureau of Economic Research) no. w10025.

NBER working paper series no. w10025

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2003.

Summary:

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.

Notes:

Print version record

October 2003.