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Kozicki Shows Central Bankers Only As Good As Forecasts

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http://www.bloomberg.com/news/2013-11-06/kozicki-shows-central-bankers-only-as-good-as-forecasts.html

For Sharon Kozicki, seeing what’s missing in economic models is as important as seeing what’s there.

Kozicki rose at the Bank of Canada in her native Ottawa to become an adviser to the governor after more than a decade at the Federal Reserve in Washington and Kansas City, where she built a global reputation improving the ways central bankers make forecasts to set policy.

It’s a skill increasingly valued as officials try to understand how the economy changed following the worst financial crisis since the Great Depression. Old economic relationships have become less reliable because the world they describe has passed, she says.

“You have to be very mindful of what’s not in your models,” Kozicki, 49, said in an interview at the Bank of Canada’s headquarters. “It doesn’t mean that you throw out your model, but you may need to bring some judgment into that framework to characterize what your model doesn’t capture.”

At the Fed in the 1990s, Kozicki saw that its economic model didn’t adequately explain how people formed expectations about inflation. Her analysis, which was praised by Chairman Ben S. Bernanke, would help the central bank as it developed a new forecasting tool to adjust to an era of slower price increases. Her “intellectual rigor” also impressed Mark Carney when they worked together, said the former Bank of Canada governor.

Although the fact all economic models are 5h1t doesn't stop the chumps at the worlds central banks from using them to predict future growth...

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Just what would it take for the Economics profession to throw out its old models?? You'd have thought that being wrong about the Crash and then wrong again about the Recovery would have been a big enough push.

Mind you, it took the Catholic church 350 years to apologise to Galileo. :lol:

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To be fair there is a lot of intellectual rigor to be found in the field of economic theory- unfortunately it's mostly of the 'mortis' variety

Keynes once said something to the effect that most apparent men of vision and leadership can be seen to be in thrall to the ideas of some long dead economist- that seems to be true of Economics itself these days- totally obsessed with the revealed 'truths' of the past to the exclusion of nearly all intelligent analysis of what is actually happening right now.

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To be fair there is a lot of intellectual rigor to be found in the field of economic theory- unfortunately it's mostly of the 'mortis' variety

:lol:

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