ISBN-10: 0691114420

ISBN-13: 9780691114422

Edition: 2007

Authors: Thomas J. Sargent, Lars Peter Hansen

List price: $65.00
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The standard theory of decision making under uncertainty advises the decision maker to form a statistical model linking outcomes to his 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 he incompletely trusts his model? Lars Hansen and Thomas Sargent, two leading macroeconomists, push the frontier of the field 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.
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Book details

List price: $65.00
Copyright year: 2007
Publisher: Princeton University Press
Publication date: 11/18/2007
Binding: Hardcover
Pages: 464
Size: 7.00" wide x 10.00" long x 1.25" tall
Weight: 2.486
Language: English

Thomas J. Sargent is Donald Lucas Professor of Economics at Stanford University and Senior Fellow at the Hoover Institution. A pioneer of the rational expectations school of macroeconomics, he is the author of The Conquest of American Inflation (Princeton), Bounded Rationality in Macroeconomics, and Dynamic Macroeconomic Theory. François R. Velde is Senior Economist at the Federal Reserve Bank in Chicago and Lecturer in Economics at the University of Chicago.

Motivation and main ideas
Basic ideas and methods
A stochastic formulation
Standard control and filtering
Linear control theory
The Kalman filter
Robust control
Static multiplier and constraint games
Time domain games for attaining robustness
Frequency domain games and criteria for robustness
Calibrating misspecification fears with detection error probabilities
A permanent income model
Multi-agent problems
Competitive equilibria without robustness
Competitive equilibria with robustness
Asset pricing
Risk sensitivity, model uncertainty, and asset pricing
Markov perfect equilibria with robustness
Robustness in forward-looking models
Robust estimation and filtering
Robust filtering with commitment
Robust filtering without commitment
Alternative approaches
Author Index
Matlab Index
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