Uncertainty

Abstract

Uncertainty is pervasive in macroeconomics. One need only look at the forecasting records of the most talented analysts or of the most sophisticated computer models to realize the amount of uncertainty in the economy. Yet most methods of macroeconomic policy determination ignore uncertainty. In contrast, feedback methods incorporate uncertainty fully into the analysis of policy options.

For macroeconomic models with shock uncertainty see Bray (1974), Garbade (1975), and Wall and Westcott (1974). For a macroeconomic model with shock,behavioral, and measurement uncertainties see Kendrick (1982).