CEPR finds bias in fiscal forecasting model
A Centre for Economic Policy Research paper published in October shows that a bias on taste and technology parameters in cross sectional research can often mislead fiscal policymakers.
A key assumption in policy experiments that use representative agent dynamic stochastic general equilibrium models to create forecasts is that fundamental parameters, such as taste and technology, are invariant with respect to policy changes.
However, Yongsung Chang, Sun-Bin Kim and Frank Schorfheide, the paper's
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