Info-Gap Economics: An Operational Introduction

Cover......Page 1
Contents......Page 6
Preface......Page 11
I: Getting Started......Page 18
1.1 Can Models Help?......Page 20
1.2 Elements of Info-Gap Theory......Page 23
1.3 Implications of Info-Gap Theory......Page 26
1.4 Applications of Info-Gap Theory......Page 28
2 A First Look: Stylized Example......Page 32
2.1 Problem Formulation......Page 33
2.2 Robustness......Page 34
2.3 Opportuneness......Page 39
II: Economic Decisions......Page 44
3.1 Taylor Rule for Interest Rates......Page 46
3.2 Expectations, Communication and Credibility......Page 58
3.3 Shocks, Expectations and Credibility......Page 73
3.4 Credibility and Interacting Agents......Page 82
3.5 Extensions......Page 94
3.6 Appendix: Auto-Regressive Representation of the Rudebusch-Svensson Model......Page 95
3.7 Appendix: Derivation of Expectation Coefficients......Page 96
3.8 Appendix: Derivation of Inverse 1-Step Robustnesses......Page 97
4.1 Structured Securities: Simple Example......Page 104
4.2 Value at Risk in Financial Economics......Page 112
4.3 Stress Testing: Suite of Models......Page 132
4.4 Strategic Asset Allocation......Page 137
4.5 Appendix: Derivation of an Info-Gap Model......Page 149
5.1 Emissions Compliance......Page 152
5.2 Enforcing Pollution Limits......Page 167
5.3 Climate Change......Page 182
5.4 Appendix: Derivation of Eq.(5.19)......Page 194
5.5 Appendix: Derivation of Eq.(5.22)......Page 195
6.1 Regression Prediction......Page 196
6.2 Auto-Regression and Data Revision......Page 206
6.3 Confidence Intervals......Page 214
6.5 Appendix: Mean Squared Error for Section 6.2......Page 226
III: Wrapping Up......Page 228
7 The Art of Uncertainty Modelling......Page 230
7.1 Uncertain Parameters......Page 231
7.2 Uncertain Function......Page 237
7.3 Extensions......Page 243
8 Positivism, F-twist, and Robust-Satisficing......Page 244
8.1 Friedman and Samuelson......Page 245
8.2 Shackle-Popper Indeterminism......Page 247
8.3 Methodological Implications......Page 248
References......Page 250
Author Index......Page 258
Subject Index......Page 261