TY  - JOUR
AU  - Brock,William A.
AU  - Durlauf,Steven N.
AU  - West,Kenneth D.
TI  - Policy Evaluation in Uncertain Economic Environments
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10025
PY  - 2003
Y2  - October 2003
UR  - http://www.nber.org/papers/w10025
L1  - http://www.nber.org/papers/w10025.pdf
N1  - Author contact info:
William Brock
Department of Economics
University of Wisconsin
1180 Observatory Drive
Madison, WI   537061393
E-Mail: wbrock@ssc.wisc.edu

Steven N. Durlauf
Department of Economics
University of Wisconsin
1180 Observatory Drive
Madison, WI  53706-1393
Tel: 608/263-3859
Fax: 608/262-2033
E-Mail: sdurlauf@ssc.wisc.edu

Kenneth D. West
Department of Economics
University of Wisconsin
1180 Observatory Drive
Madison, WI  53706
Tel: 608/262-0033
Fax: 608/262-2033
E-Mail: kdwest@wisc.edu
AB  - This paper develops a decision-theoretic approach to policy analysis. We argue that policy evaluation should be conducted on the basis of two factors: the policymaker's preferences, and the conditional distribution of the outcomes of interest given a policy and available information. From this perspective, the common practice of conditioning on a particular model is often inappropriate, since model uncertainty is an important element of policy evaluation. We advocate the use of model averaging to account for model uncertainty and show how it may be applied to policy evaluation exercises. We illustrate our approach with applications to monetary policy and to growth policy.
ER  -