wanting robustness in macroeconomics

7/31/2019 Wanting Robustness in Macroeconomics

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Urn A:

10 red balls

10 black balls

Urn B:

unknown fraction ofred and black balls

Ellsberg defended a preference for Urn A


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0.12 0.1 0.08 0.06 0.04 0.02 00

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

0.5

p()


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5 10 15 20 25 30 35 40 45 500

0.1

0.2

0.3

0.4

transitory d2

tpart

5 10 15 20 25 30 35 40 45 500

0.1

0.2

0.3

0.4

permanent d1

tpart

5 10 15 20 25 30 35 40 45 500

0.1

0.2

0.3

0.4

dt

1975 1980 1985 1990 19951.5

1

0.5

0

0.5

1

1.5 Individual Components of the endowment processes

persistent componenttransitory component


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1975 1980 1985 1990 19951.5

1

0.5

0

0.5

1

1.5Individual Components of the filtered processes

persistent componenttransitory component


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1955 1960 1965 1970 1975 1980 1985 1990 1995 20004.2

4.1

4

3.9

3.8

3.7Log Technology Shock Process

1955 1960 1965 1970 1975 1980 1985 1990 1995 20000

0.2

0.4

0.6

0.8

1

Estimated Probability in Low State


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0.09 0.08 0.07 0.06 0.05 0.04 0.03 0.02 0.01 04

3.8

3.6

3.4

3.2

3

2.8

2.6

2.4

= 0

= .04

= .085

value


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0 1 2 30

1

2

3

4

5

6

7

8

9

10

=

= 10

= 5

0 1 2 30

1

2

3

4

5

6

7

8

9

10

=

= 10

= 5


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0 1 2 3 4 5 6 7 80

0.2

0.4

0.6

0.8

1

response to t

0 1 2 3 4 5 6 7 8

0.2

0.1

0

0.1

0.2

response to t


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0.1 0.15 0.2 0.25 0.3 0.35 0.4 0.45 0.50

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

FourPeriodMarketPriceofKnightianUncertainty

Detection Error Probability

HST

HSWBenchmark


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wanting robustness in macroeconomics

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