Macroeconomics and a bit more reality

Article Abstract:

The arguments advanced by Sims against macroeconomic modeling are refuted. These criticisms revolve around the concepts of systems, expectations and dynamics. The popularity of macroeconomic modeling started in the 1950s but declined in the 1980s during Sims' time because of their failure to deliver promised results. Nevertheless, with the improvement in methodology and the refinement in conceptualization, such models will prove to be useful in international economic policy making.

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Behavioural heterogeneity under evolutionary pressure: macroeconomic implications of costly optimisation

Article Abstract:

A macroeconomic model is derived to take into account the presence of heterogeneity in the behavior of economic agents. These agents are either considered naive which, in this case, display behavior that conform to rational expectations theory or sophisticated, whereby costs are incurred while optimization strategies are carried out. In the long term, the existence of sophisticated agents results in low production and a greater deviation in productivity.

Research, Rational expectations (Economics), Mathematical optimization, Optimization theory

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The interfaces between policy makers, markets and modellers in the design of economic policy: an intermodel comparison

Article Abstract:

The importance of economic models is presented via a simulation of the economic policy exercises in the UK. Particular focus is given to policymaking in the country's Treasury, the Oxford Economic Forecasting, London Business School and the National Institute of Economic and Social Research. Such policymaking will always produce better results when models are used no matter how crude they may be.

United Kingdom, Economic policy

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