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A trade-off criterion for evaluating effectiveness and reliability of alternative policy actions

Carlo Bianchi (), Jean-Louis Brillet and Giorgio Calzolari

MPRA Paper from University Library of Munich, Germany

Abstract: The evaluation of policy actions by means of macroeconomic models often begins with the analysis of multipliers. A rough analysis recommends to use those instruments that exhibit large multipliers. Government budget usually imposes some constraints on the policy action. Insted of the raw multiplier, a trade-off criterion could measure the effect of a variation of the instrument associated with a given cost in terms of government deficit. The trade-off criterion can be computed from the macroeconomic model, and this paper shows how to associate a standard error to the point estimate, thus providing a measurement of reliability of the policy instrument.

Keywords: Trade-off criterion; multipliers; standard errors of multipliers; large scale econometric model; French economy (search for similar items in EconPapers)
JEL-codes: C53 C63 (search for similar items in EconPapers)
Date: 1988
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Published in Atti del Dodicesimo Convegno A.M.A.S.E.S. Palermo, 14-16 Settembre 1988 (1988): pp. 185-217

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