A trade-off criterion for evaluating effectiveness and reliability of alternative policy actions

Bianchi, Carlo and Brillet, Jean-Louis and Calzolari, Giorgio (1988): A trade-off criterion for evaluating effectiveness and reliability of alternative policy actions. Published in: Atti del Dodicesimo Convegno A.M.A.S.E.S. No. Palermo, 14-16 Settembre 1988 (14 September 1988): pp. 185-217.

Abstract

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Trade-off criterion; multipliers; standard errors of multipliers; large scale econometric model; French economy
• Subjects: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C53 - Forecasting and Prediction Methods ; Simulation Methods; C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C63 - Computational Techniques ; Simulation Modeling

References

Amemiya, T. (1983), "Non-linear Regression Models", in in Handbook of Econometrics, ed. by Z. Griliches and M. D. Intriligator. Amsterdam: North-Holland Publishing Company, Vol. I, 333-389.

Bianchi, C., J.L. Brillet et G. Calzolari (1984), "Analyse et Mesure de l'Incertitude en Prevision d'un Modele Econometrique. Application au Modele Mini-DMS" Annales de l'INSEE 54, 31-62.

Bianchi, C, G. Calzolari and P. Corsi (1981), "Estimating Asymptotic Standard Errors and Inconsistencies of Impact Multipliers in Nonlinear Econometric Models", Journal of Econometrics 16, 277-294.

Brillet, J. L. (1981), "Mini-DMS: Modele Macroeconomique de Simulation". Paris: INSEE, Archives & Documents No. 35.

Brundy, J. M., and D. W. Jorgenson (1971), "Efficient Estimation of Simultaneous Equations by Instrumental Variables", The Review of Economics and Statistics 53, 207-224.

Evans, M. K. and L.R. Klein (1968), The Wharton Econometric Forecasting Model, Philadelphia: Economics Research Unit, University of Pennsylvania.

Fouquet, D., Charpin, J.M., Guillaume, H., Muet, P.A. et Vallet, D. (1978). DMS, Modele Dynamique Multisectoriel. Paris: Collection de l'INSEE, Serie C, n. 64-65.

McCarthy, M. D. (1972), "Some Notes on the Generation of Pseudo-Structural Errors for Use in Stochastic Simulation Studies", in Econometric Models of Cyclical Behavior, ed. by B. G. Hickman. New York: National Bureau of Economic Research, Studies in Income and Wealth No. 36, Columbia University Press, 185-191.

Rao, C. R. (1973), Linear Statistical Inference and its Applications. New York: John Wiley & Sons, Inc.