Robustness

Robustness

by Lars Peter Hansen, Thomas J. Sargent
     
 

ISBN-10: 0691114420

ISBN-13: 9780691114422

Pub. Date: 10/29/2007

Publisher: Princeton University Press

The standard theory of decision making under uncertainty advises the decision maker to form a statistical model linking outcomes to decisions and then to choose the optimal distribution of outcomes. This assumes that the decision maker trusts the model completely. But what should a decision maker do if the model cannot be trusted?

Lars Hansen and Thomas Sargent, two

Overview

The standard theory of decision making under uncertainty advises the decision maker to form a statistical model linking outcomes to decisions and then to choose the optimal distribution of outcomes. This assumes that the decision maker trusts the model completely. But what should a decision maker do if the model cannot be trusted?

Lars Hansen and Thomas Sargent, two leading macroeconomists, push the field forward as they set about answering this question. They adapt robust control techniques and apply them to economics. By using this theory to let decision makers acknowledge misspecification in economic modeling, the authors develop applications to a variety of problems in dynamic macroeconomics.

Technical, rigorous, and self-contained, this book will be useful for macroeconomists who seek to improve the robustness of decision-making processes.

Product Details

ISBN-13:
9780691114422
Publisher:
Princeton University Press
Publication date:
10/29/2007
Edition description:
New Edition
Pages:
454
Product dimensions:
7.20(w) x 10.10(h) x 1.60(d)

Table of Contents

Preface xv

Acknowledgments xvii

Part I: Motivation and main ideas

Chapter 1: Introduction 3

Chapter 2: Basic ideas and methods 25

Chapter 3: A stochastic formulation 53

Part II: Standard control and filtering

Chapter 4: Linear control theory 67

Chapter 5: The Kalman filter 103

Part III: Robust control

Chapter 6: Static multiplier and constraint games 119

Chapter 7: Time domain games for attaining robustness 139

Chapter 8: Frequency domain games and criteria for robustness 173

Chapter 9: Calibrating misspecification fears with detection error probabilities 213

Chapter 10: A permanent income model 223

Part IV: Multi-agent problems

Chapter 11: Competitive equilibria without robustness 253

Chapter 12: Competitive equilibria with robustness 271

Chapter 13: Asset pricing 295

Chapter 14: Risk sensitivity, model uncertainty, and asset pricing 307

Chapter 15: Markov perfect equilibria with robustness 327

Chapter 16: Robustness in forward-looking models 333

Part V: Robust estimation and filtering

Chapter 17: Robust filtering with commitment 359

Chapter 18: Robust filtering without commitment 383

Part VI: Extensions

Chapter 19: Alternative approaches 403

References 413

Index 427

Author Index 431

Matlab Index 435

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