Climbing ‘Mount Economy’
"It is like trying to get to the top of a mountain," says Claudio Borio, head of the Bank for International Settlements' (BIS) monetary and economic department. "You can follow the winding and steep trail, or you can take the cable car." Borio is talking about central banks' approaches to modelling. Choosing the correct analytical approach for each question is the difference between slogging up the winding path or taking the direct route. Of course, both should lead to the summit – eventually.
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