3 - Empirical Distributions: Statistical Laws in Macroeconomics
Published online by Cambridge University Press: 05 May 2010
Summary
This chapter follows up the motivating examples in Sections 2.2 and 2.3, and introduces the reader to some concepts and techniques that are useful in discussing behavior of macroeconomic variables statistically, but are not currently being employed by the majority of the economics profession.
Elementary discussions of entropy, Gibbs distributions and some introductory material from large deviation theory are provided. Entropy is not only important in describing states of macroeconomic systems made up of a large collection of interacting microeconomic agents but also is crucial in providing bounds for probabilities of large deviations from normal states. Gibbs distributions are important because equilibrium distributions of macroeconomic states are of this type. Large deviation theory has obvious distributional implications in macroeconomic policy studies by means of more disaggregate models than currently practiced.
Model descriptions
Micro and macro descriptions of models
Depending on the level of detail used in explaining economic phenomena, we can have either a micro description, which is a complete description (at least theoretically) of all units or agents in the model, or a macro description, which keeps track only of some of the observables which are some functions of the microscopic or microeconomic variables in the model. Microvariables needed to achieve a complete description, in the sense that models become Markovian, usually are not observed directly (see the examples in Chapter 2).
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- Information
- New Approaches to Macroeconomic ModelingEvolutionary Stochastic Dynamics, Multiple Equilibria, and Externalities as Field Effects, pp. 40 - 80Publisher: Cambridge University PressPrint publication year: 1996