Loss functions and public policy

Horowitz, Ann R.

doi:10.1016/0164-0704(87)90016-4

Cited by 21 publications

(8 citation statements)

References 22 publications

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“…The origins of today’s sticky‐price macroeconomic theories are Taylor’s (1980), Rotemberg’s (1982), and Calvo’s (1983) initial work incorporating staggered adjustments into linear models that appealed to quadratic loss functions as approximations to “consumer surplus” measures, as in Aizenman and Frenkel (1985) and Horowitz (1987). Based on the roadmap first provided by Blanchard and Kiyotaki (1987), the preponderance of modern sticky‐price macro models begins with microfoundations based on decision making by optimizing agents, a mode of analysis that in a dynamic, general‐equilibrium context rules out equilibria in which agents make decisions at any point that turn out to be inconsistent with long‐term or lifetime budget constraints.…”

Section: The Sticky‐price Assumption: Theory and Evidencementioning

confidence: 99%

Disaggregate Evidence on Price Stickiness and Implications for Macro Models

Gwin¹,

Hoose²

2008

Economic Inquiry

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"We use the methodology applied at the aggregate level by Gali and Gertler (1999) to analyze price and cost data for U.S. six-digit North American Industry Classification System (NAICS) industries. Industries with price adjustment periods of at least 6 quarters generate no more than about 43% of total sales of industries we analyze. Industries with estimated price adjustment speeds of less than a year generate at least 44% of sales. Our conclusion is that disaggregate U.S. data provide as much support in favor of relatively high price flexibility as they do for the assumption of widespread price stickiness utilized in many modern macroeconomic theories. "("JEL "E31, L16) Copyright (c) 2007 Western Economic Association International.

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Section: The Sticky‐price Assumption: Theory and Evidencementioning

confidence: 99%

Disaggregate Evidence on Price Stickiness and Implications for Macro Models

Gwin¹,

Hoose²

2008

Economic Inquiry

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“…Thus, u t appears in Devereux (1987Devereux ( , 1989, VanHoose and Waller (1991), Rasmussen (1993), Milesi-Ferretti (1994, and Mourmouras (1993Mourmouras ( , 1997. v t is used 1 The interested reader may refer to Horowitz (1987) for a discussion of the properties of quadratic loss functions. 2 The importance of the timing of shocks cannot be overemphasised here.…”

Section: The Set-upmentioning

confidence: 99%

A note on the welfare consequences of wage indexing in a stochastic economy

Méon¹

2004

Portuguese Economic Journal

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This note surveys the welfare and real consequences of wage indexing in a stochastic economy whose monetary authority lacks credibility. It shows in a unified framework that those consequences might differ markedly depending on the nature and timing of the dominant disturbance in that economy. It finally provides a closed-form expression of the optimal level of wage indexing when all the shocks are taken into account.

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“…The use of asymmetric loss functions for econometric modelling has been discussed by Waud (1976), Kunstman (1984), Zellner (1986) and Horowitz (1987) to name a few. Ruge-Murcia (2002) developed and estimated a theoretical model of inflation targeting, similar to the Barro and Gordon model (1983) in which they suggested that the central banker's preferences are asymmetric around the targeted inflation rate.…”

Section: Introductionmentioning

confidence: 99%

Preliminary testing of the Cobb–Douglas production function and related inferential issues

Kleyn

Arashi

Bekker

et al. 2016

Communications in Statistics - Simulation and Computation

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In this paper, we consider the multiple regression model in the presence of multicollinearity and study the performance of the preliminary test estimator (PTE) both analytically and computationally, when it is a priori suspected that some constraints may hold on the vector parameter space. The performance of the PTE is further analysed by comparing the risk of some well-known estimators of the ridge parameter through an extensive Monte Carlo simulation study under some bounded and or asymmetric loss functions. An application of the Cobb-Douglas production function is included and from these results as well as the simulation studies, it is clear that the bounded linear exponential loss function outperforms the other loss functions across all the proposed ridge parameters by comparing the risk values.

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Loss functions and public policy

Cited by 21 publications

References 22 publications

Disaggregate Evidence on Price Stickiness and Implications for Macro Models

Disaggregate Evidence on Price Stickiness and Implications for Macro Models

A note on the welfare consequences of wage indexing in a stochastic economy

Preliminary testing of the Cobb–Douglas production function and related inferential issues

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