tag:blogger.com,1999:blog-7562826833514049440.post7767864473240344899..comments2019-01-08T21:06:10.972-08:00Comments on The Ramblings of an Amateur Economist: Choosing the Best Model For Each ContextJohn Handleyhttp://www.blogger.com/profile/16057855086740377031noreply@blogger.comBlogger12125tag:blogger.com,1999:blog-7562826833514049440.post-34627598040141506092016-01-23T10:40:04.895-08:002016-01-23T10:40:04.895-08:00Vincent,
"Sometimes there are very different...Vincent,<br /><br />"Sometimes there are very different models that all really predict the same thing."<br /><br />The problem is that different models provide a different diagnosis for different situations. This is why it is best to choose models based on their assumptions rather than their results. <br /><br />Or, if we take this a slightly different direction, we could have looked at the US monetary base starting in 2009 and naively concluded that a hyperinflation would occur because of the equation of exchange. This prediction has been obviously proven wrong, so clearly looking at monetary policy through the lens of exogenous velocity is completely wrong in this case.<br /><br />Now, if we decided to make predictions in 2009 using a model in which money demand becomes indeterminate at the zero lower bound, we would have rightly concluded that there would be at best anemic inflation at the zero lower bound and that any expansion of the monetary base would be pretty much useless. <br /><br />Regarding your list of models, despite the fact that all give the same result of a hyperinflation (which we've failed to observe in the US, by the way), clearly not all of them apply to a given situation, unless they really are just the same model with a different rationalization applied to each (This is why using formal mathematical models is useful, so the qualitative differences between models are easily understood). John Handleyhttps://www.blogger.com/profile/16057855086740377031noreply@blogger.comtag:blogger.com,1999:blog-7562826833514049440.post-27724365879427941012016-01-23T09:54:56.714-08:002016-01-23T09:54:56.714-08:00Sometimes there are very different models that all...Sometimes there are very different models that all really predict the same thing. The way they get to the result can be very different though. It can help you get a deeper understanding to be able to think about things in different ways.<br /><br />I can illustrate this with many very different ways of explaining hyperinflation. These are not in contradiction but different ways of thinking about what is going on.<br /><br />http://howfiatdies.blogspot.com/2013/09/hyperinflation-explained-in-many.html<br />Vincent Catehttps://www.blogger.com/profile/06502618776820144289noreply@blogger.comtag:blogger.com,1999:blog-7562826833514049440.post-45123644572103650592016-01-18T10:15:46.537-08:002016-01-18T10:15:46.537-08:00Tom,
"When did you get interested in macro?&...Tom,<br /><br />"When did you get interested in macro?"<br /><br />Around September 2014, I think.<br /><br />"BTW, I have lots of cousins there in Torrance (which I think I read you're from). Three of them own a machine shop: DASCO I think the name is. They make aircraft parts."<br /><br />I looked it up and DASCO is about three blocks away from my house (although I will be moving to Tokyo in August, so it'll soon be more like 5,000 miles).<br /><br />"If you Google that w/ quotes, it's all you, so I suspect the "of" should be an "if?""<br /><br />That's been there forever, I can't believe no one caught it. Thanks.<br /><br />When it comes to VAR models, part of the reason I ignore them (aside from me not understanding how to use them) is that they strike me as a bit too a-theoretical; Sadowski can draw all the trend trend lines he wants to, but, so long as he doesn't explain theoretically how QE was effective, I won't really care. Especially when http://informationtransfereconomics.blogspot.com/2015/07/the-sadowski-theory-of-money.html is the case.John Handleyhttps://www.blogger.com/profile/16057855086740377031noreply@blogger.comtag:blogger.com,1999:blog-7562826833514049440.post-68699948422602570542016-01-18T06:36:03.404-08:002016-01-18T06:36:03.404-08:00Also, this guy does forecasts:
http://allanwgregor...Also, this guy does forecasts:<br />http://allanwgregory.blogspot.com/Tom Brownhttp://www.google.comnoreply@blogger.comtag:blogger.com,1999:blog-7562826833514049440.post-37196925765713443042016-01-18T06:32:38.387-08:002016-01-18T06:32:38.387-08:00"better sense" ... that is better than 0..."better sense" ... that is better than 0, which is where I was at prior to attempting to understand the Smith/Sadowski cage match.Tom Brownhttp://www.google.comnoreply@blogger.comtag:blogger.com,1999:blog-7562826833514049440.post-78106784566768222532016-01-18T06:29:50.675-08:002016-01-18T06:29:50.675-08:00VAR models: have you read Dave Giles blog? I can&#...VAR models: have you read Dave Giles blog? I can't say I understand them, but I have a better sense for what's involved. I referred to it after looking at Mark Sadowski's series of guest posts (on Marcusd Nunes' site) in 2015 in which he attempts to show the efficacy of QE in the "age of ZIRP" through various channels. He and Jason got into it after that, in a long series of exchanges on Jason's site. But regardless, I found <a href="http://davegiles.blogspot.ca/2011/04/testing-for-granger-causality.html" rel="nofollow">one post on Dave's site</a> in particular (on Granger causality) which helped me understand what Sadowski was up to. Since, as usual (when trying to follow two people who's understanding far exceeds my own), I was struggling to follow their disagreement, I subtly tried to get Dave to render his opinion on parts of the exchange ... as unbiased expert commentary... but he didn't really take the bait. Except on one small point. Dave has a "Reader's Forum" in which you can ask him general questions.Tom Brownhttp://www.google.comnoreply@blogger.comtag:blogger.com,1999:blog-7562826833514049440.post-52494725559584496092016-01-18T01:06:22.854-08:002016-01-18T01:06:22.854-08:00When did you get interested in macro?When did you get interested in macro?Tom Brownhttp://www.google.comnoreply@blogger.comtag:blogger.com,1999:blog-7562826833514049440.post-77842883506553289602016-01-18T01:02:57.571-08:002016-01-18T01:02:57.571-08:00Interesting. You've got time to fill those hol...Interesting. You've got time to fill those holes in I think (should you be so inclined). <br /><br />I took a look at your twitter page and saw this:<br /><br />"An iconoclast of there ever was one"<br /><br />If you Google that w/ quotes, it's all you, so I suspect the "of" should be an "if?"<br /><br />BTW, I have lots of cousins there in Torrance (which I think I read you're from). Three of them own a machine shop: DASCO I think the name is. They make aircraft parts.Tom Brownhttp://www.google.comnoreply@blogger.comtag:blogger.com,1999:blog-7562826833514049440.post-13475152286645768162016-01-17T23:15:19.082-08:002016-01-17T23:15:19.082-08:00Tom,
No problem!
I haven't bothered to actua...Tom,<br /><br />No problem!<br /><br />I haven't bothered to actually buy a proper economics textbook and read through it. Mostly, I tried to find professors who post the presentations for their lectures online (like Lutz Hendricks), browsed ideas.repec.org for papers dealing with topics I was interested in, and read a bunch of economics blogs. Otherwise, I occasionally find pdf's of certain chapters of textbooks (my current favorite is Woodford and Friedman's Handbook of Monetary Economics) or whole books, like Woodford's "Interest and Prices" -- which I have yet to read through.<br /><br />If anything, I'd say the way I learned most of what I currently know about economics has been really eclectic and left me with weird holes in my knowledge such as a completely lack of understanding of VAR models and a bit of a disdain for dynamic programming and continuous time models in general.John Handleyhttps://www.blogger.com/profile/16057855086740377031noreply@blogger.comtag:blogger.com,1999:blog-7562826833514049440.post-50011083217485755992016-01-17T22:41:47.586-08:002016-01-17T22:41:47.586-08:00John, thanks for the info and the links. I'm f...John, thanks for the info and the links. I'm familiar with both Matlab and Octave.<br /><br />What's your favorite intro economics book and/or macro text? Or did you learn reading papers? Rowe said Mankiw or Krugman or others... doesn't matter.Tom Brownhttp://www.google.comnoreply@blogger.comtag:blogger.com,1999:blog-7562826833514049440.post-88401675035147795652016-01-17T22:05:30.602-08:002016-01-17T22:05:30.602-08:00Tom,
The reason I omitted the stochastic part of ...Tom,<br /><br />The reason I omitted the stochastic part of DSGE is that the stochastic component that is present in, e.g., business cycle theory is not necessarily a requirement for models commonly used in the rest of macro -- perfect foresight growth models, for example. I considered removing the "dynamic" part as well so it would just be "general equilibrium," but I decided that that would be too general (excuse the pun).<br /><br />As for my personal use of D(S)GE models, the most recent time I simulated one was in this post: http://ramblingsofanamateureconomist.blogspot.com/2015/12/shut-up-about-ricardian-equivalence.html<br /><br />I use a program called Dynare (http://www.dynare.org), which works in conjunction wither either Matlab or Octave (its open source counterpart) to generate impulse response functions for stochastic models.<br /><br />Otherwise, I try to develop specific models to formally explain my reasoning in posts. A few examples of this are http://ramblingsofanamateureconomist.blogspot.com/2015/12/whats-significance-of-low-real-interest.html, http://ramblingsofanamateureconomist.blogspot.com/2015/11/demystifying-neo-fisherism.html, and http://ramblingsofanamateureconomist.blogspot.com/2015/11/monetary-policy-effectiveness-in.html<br /><br />I have tried to replicate Jason's DSGE version of the ITM, but never wrote a blog post about it (mainly because Dynare is rather particular about the way you input models; simplicity comes at a price, I guess). I might compare some of what I consider to be 'the stylized facts of Information Transfer Economics' (unless Jason has already come up with his own, in which case I'll just use his) with 'the stylized facts of the strange hybrid of Monetarism and New Keynesianism that I seem to embody.'John Handleyhttps://www.blogger.com/profile/16057855086740377031noreply@blogger.comtag:blogger.com,1999:blog-7562826833514049440.post-58746511829407459712016-01-17T21:09:19.503-08:002016-01-17T21:09:19.503-08:00I doubt you'll incur Jason's wrath, since ...I doubt you'll incur Jason's wrath, since I don't think he claims his framework or models cover all things economic. In fact, in a comment to me once he remarked something to the effect of "My models are already wrong." I can't recall what followed, but he had an example: I think it was something he doesn't even attempt to explain. The example might have been something like modeling when a "market coordination" (to use his words) is likely to happen and cause "non-ideal" information transfer (like a panic leading to a down turn). In any case I thought "wrong" was a bit strong, but I got his point.<br /><br />Also, you write:<br /><br />"DGE approach currently dominant in economics"<br /><br />DGE = dynamic general equilibrium?<br /><br />Any reason you didn't include the "S" in that usage of the term? (the "stochastic" part)?<br /><br />Have you used such models, BTW? Or created your own? Perhaps in the form of a Mathematica or Matlab script or some other language?<br /><br />Also, have you ever tried to recreate one of Jason's models and see if you can duplicate his results?Tom Brownhttp://www.google.comnoreply@blogger.com