The possibility of ideological bias in structural macroeconomics models

Gilles Saint-Paul

No 8465, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper studies the trade-offs that an expert with ideological biases faces in designing his model. I assume the perceived model must be autocoherent, in that its use by all agents delivers a self-concerming equilibrium. The exercise is carried in the context of a simplified AS-AD model, where in principle the expert can influence policy by manipulation six key parameters: the Keynesian multiplier, the interest elasticity of aggregate demand, the response of output to actual and expected inflation in the Phillips curve, and the variances of supply and demand shocks. Typically, a larger reported Keynesian multiplier is favored by more left-wing economists, as is a flatter inflation output trade-off. But an important aspect of the analysis is that autocoherence conditions imply constraints and trade-offs between parameters. For example a larger reported Keynesian multiplier must be associated with a lower interest elasticity of aggregate demand for the economists?s model to match the data. Also, some parameters or some combinations of parameters must be truthfully revealed for the expert to remain autocoherent. These are the parameters that are "identified" from the empirical moments of the distribution of observables. This illustrates the tight link between parameter identification and the scope for bias that is generated by the autocoherence conditions.

Keywords: Autocoherence; Bias; Experts; Ideology; Macroeconomic modelling; Political economy (search for similar items in EconPapers)
JEL-codes: A11 E6 (search for similar items in EconPapers)
Date: 2011-07
New Economics Papers: this item is included in nep-cba
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Related works:
Journal Article: The Possibility of Ideological Bias in Structural Macroeconomic Models (2018)
Working Paper: The Possibility of Ideological Bias in Structural Macroeconomic Models (2018)
Working Paper: The Possibility of Ideological Bias in Structural Macroeconomic Models (2018)
Working Paper: The possibility of ideological bias in structural macroeconomic models (2011)
Working Paper: The possibility of ideological bias in structural macroeconomic models (2011)
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