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True State (true + state)
Selected AbstractsUNCERTAINTY AND MONETARY POLICY RULES IN THE UNITED STATESECONOMIC INQUIRY, Issue 2 2009CHRISTOPHER MARTIN This article analyzes the impact of uncertainty about the true state of the economy on monetary policy rules in the United States since the early 1980s. Extending the Taylor rule to allow for this type of uncertainty, we find evidence that the predictions of the theoretical literature on responses to uncertainty are reflected in the behavior of policymakers, suggesting that policymakers are adhering to prescriptions for optimal policy. Our estimates suggest that the effect of uncertainty on interest rates was most marked in 1983, when uncertainty increased interest rates by up to 140 basis points, in 1990,1991, when uncertainty reduced interest rates by up to 80 basis points, and in 1996,2001, when uncertainty reduced interest rates by up to 70 basis points over 5 yr. (JEL C51, C52, E52, E58) [source] Costly State Verification with Varying Risk Preferences and LiabilityJOURNAL OF ECONOMIC SURVEYS, Issue 1 2006Gaia Garino Abstract., In the scenario of loan contracts with costly state verification, we examine how the properties of the set of states, different risk preferences of debtors and varying liability of lenders affect the structure of optimal repayments. In particular, we show that with risk-averse debtors, a general set of states, a constant observation cost and both unlimited and limited lender liability, the debtor is strictly better off revealing the true state of nature when his realized revenue is low, which implies that optimal debtor consumption has a downward jump around the single switch from observed to unobserved states. If the debtor can destroy revenue or if the debtor is risk neutral, this non-monotonicity of consumption disappears. Moreover, given the loan size, there is more monitoring under debtor-risk aversion than risk neutrality. We present simulations showing that a contract with unlimited lender liability and debtor-risk aversion has a higher expected observation cost but a lower variance of consumption than a contract with limited lender liability. Finally, we discuss the problems of commitment to verification and contract renegotiation in this framework. [source] Overcompensation as a Partial Solution to Commitment and Renegotiation Problems: The Case of Ex Post Moral HazardJOURNAL OF RISK AND INSURANCE, Issue 4 2004M. Martin Boyer In a Costly State Verification world, an agent who has private information regarding the state of the world must report what state occurred to a principal, who can verify the state at a cost. An agent then has what is called ex post moral hazard: he has an incentive to misreport the true state to extract rents from the principal. Assuming the principal cannot commit to an auditing strategy, the optimal contract is such that: (1) the agent's expected marginal utility when there is an accident (high- and low-loss states) is equal to his marginal utility when there is no accident; (2) the lower loss is undercompensated, while the higher loss is overcompensated; and (3) the welfare of the agent is greater under commitment than under no-commitment. Result 2 is contrary to the results obtained if the principal can commit to an auditing strategy (higher losses underpaid and lower losses overpaid). The reason is that by increasing the difference between the high and the low indemnity payments, the probability of fraud is reduced. [source] A semi-Markov model for binary longitudinal responses subject to misclassificationTHE CANADIAN JOURNAL OF STATISTICS, Issue 3 2001Rhonda J. Rosychuk Abstract The authors propose a two-state continuous-time semi-Markov model for an unobservable alternating binary process. Another process is observed at discrete time points that may misclassify the true state of the process of interest. To estimate the model's parameters, the authors propose a minimum Pearson chi-square type estimating approach based on approximated joint probabilities when the true process is in equilibrium. Three consecutive observations are required to have sufficient degrees of freedom to perform estimation. The methodology is demonstrated on parasitic infection data with exponential and gamma sojourn time distributions. Un modèle semi-markovien pour données longitudinales binaires sujettes à des erreurs de classification Les auteures proposent un modèle semi-markovien à temps continu et à deux états pour un processus binaire alternant non-observable. Un processus auxiliaire observé en temps discret renseigne toutefois de façon imparfaite quant à l'état réel du processus d'intér,t. Pour estimer les paramètres du modèle, les auteures proposent la minimisation d'un critère de type khi-deux de Pearson en s'appuyant sur une approximation des probabilités conjointes du processus en équilibre. Trois observations consécutives fournissent suffisamment de degrés de liberté aux fins d'estimation. La méthodologie est illustrée au moyen de données sur une infection parasitaire avec temps de séjour exponentiel et gamma. [source] A New Method for Choosing Sample Size for Confidence Interval,Based InferencesBIOMETRICS, Issue 3 2003Michael R. Jiroutek Summary. Scientists often need to test hypotheses and construct corresponding confidence intervals. In designing a study to test a particular null hypothesis, traditional methods lead to a sample size large enough to provide sufficient statistical power. In contrast, traditional methods based on constructing a confidence interval lead to a sample size likely to control the width of the interval. With either approach, a sample size so large as to waste resources or introduce ethical concerns is undesirable. This work was motivated by the concern that existing sample size methods often make it difficult for scientists to achieve their actual goals. We focus on situations which involve a fixed, unknown scalar parameter representing the true state of nature. The width of the confidence interval is defined as the difference between the (random) upper and lower bounds. An event width is said to occur if the observed confidence interval width is less than a fixed constant chosen a priori. An event validity is said to occur if the parameter of interest is contained between the observed upper and lower confidence interval bounds. An event rejection is said to occur if the confidence interval excludes the null value of the parameter. In our opinion, scientists often implicitly seek to have all three occur: width, validity, and rejection. New results illustrate that neglecting rejection or width (and less so validity) often provides a sample size with a low probability of the simultaneous occurrence of all three events. We recommend considering all three events simultaneously when choosing a criterion for determining a sample size. We provide new theoretical results for any scalar (mean) parameter in a general linear model with Gaussian errors and fixed predictors. Convenient computational forms are included, as well as numerical examples to illustrate our methods. [source] The strategic leadership of complex practice: opportunities and challengesCHILD ABUSE REVIEW, Issue 5 2010Tony Morrison Abstract This paper addresses the issue of how strategic-level partnerships, such as Local Safeguarding Children Boards, know about and learn from practice. The death of Baby Peter in Haringey exposed the dangers of reliance on numerical performance data alone to inform leaders about the true state of practice. The drivers for, and impact of, regulatory, media and political pressures on front-line practice and partnership behaviour are discussed with reference to the rise of organisational risk management and ,rule-based' responses (Munro, 2009). These are exacerbated by an overload of negative data about child protection systems which results in contagious ,attention cascades' which lead to over-simplification of complex issues and the rush to quick-fix solutions. This results in compliance-based responses designed to avoid ,blame', based on individualistic analyses of complex situations. Under these conditions, ,learning', such as from serious case reviews, can become regressive (how to avoid future culpability) rather than progressive (how to improve knowledge skills and practice). It is argued that understanding and improving practice require strategic partnerships to have engaged with front-line staff in order to access practice narratives as well as performance numbers, and to achieve an accurate and systemic analysis of the state of practice and how it can be improved. This calls for collective forms of knowing and reflecting and the paper concludes by describing examples. Copyright © 2010 John Wiley & Sons, Ltd. [source] | |||||||||||||