Frontiers of economic research

Narayana Kocherlakota, 18 June 2018

Modern macro models offer insights into the outcomes of adopting entire policy regimes, but in reality, policymakers are rarely required to make such broad-ranging policy decisions. This column suggests how theoretical and applied microeconomics can be used to develop a framework for modern macroeconomic policymaking, and demonstrates how game-theoretic principles could be used to make series of sequential policy decisions. While this approach requires large amounts of data, it would allow academic macroeconomists to refocus on important policy questions.

Joshua Gans, 10 June 2018

Philosophers have speculated that an AI tasked with a task such as creating paperclips might cause an apocalypse by learning to divert ever-increasing resources to the task, and then learning how to resist our attempts to turn it off. But this column argues that, to do this, the paperclip-making AI would need to create another AI that could acquire power both over humans and over itself, and so it would self-regulate to prevent this outcome. Humans who create AIs with the goal of acquiring power may be a greater existential threat.

Roberto Duncan, Enrique Martínez García, 08 June 2018

Understanding what helps forecast inflation is important for any modern economy, but analysis remains limited in the emerging market economy context. This column presents recent findings on inflation forecasting in such economies, showing that a variant of the simple random walk model specification seems difficult to beat. The strong forecasting performance of this model can be observed even though many emerging economies have adopted a de facto or de jure inflation-targeting regime.

Yuriy Gorodnichenko, Tho Pham, Oleksandr Talavera, 02 June 2018

The rise of social media has profoundly affected how people acquire and process information. Using Twitter data on the Brexit referendum and the 2016 US presidential election, this column studies how social media bots shape public opinion and voting outcomes. Bots have a tangible effect on the tweeting activity of humans, but the degree of their influence depends on whether they provide information consistent with humans’ priors. The findings suggest that effect of bots was likely marginal, but possibly large enough to affect voting outcomes in the two elections.

Jan Fredrik Qvigstad, Tore Schei, 01 June 2018

The minutes in which central banks justify their decisions vary considerably in length, and the same also applies to supreme court judgements. This column proposes criteria for ‘good’ justifications and asks whether these criteria are met in practice. It concludes that the Swedish Riksbank could look at the way the UK Supreme Court’s justifications have developed, the European Court of Justice could learn something from Paul Romer’s insistence on clear language, and the European Court of Human Rights Grand Chamber might draw inspiration from the length and clarity of the Central Bank of Iceland’s minutes.

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