The distinction between transitory and permanent shocks bears important implications for economic analysis in general, and for forecasting and policy issues in particular. This distinction is at the centre of the debate on which class of models is best suited to represent economic variables:...

Abstract This paper discusses some reasons why system control theory has had only a limited impact on economic analysis, especially on government policy¬making. First, in engineering targets are well formulated and known to the controller; in economics, government's targets are often unknown or...

While quarterly consumption data are known to be well fitted by an integrated first-order moving average process, IMA (1,1), with a positive coefficient, it is found that monthly consumption data are well fitted by the same type of process, but with a negative coefficient. This sign reversal has...

The error term in the equation defining the permanent income hypothesis is sometimes viewed in the literature as transitory consumption (generated by the agent), and is sometimes viewed as measurement error (generated by the observer). In both cases, it is usually assumed to be white noise....

This paper compares inertial behavior on schedule and hierarchically decomposed behavior, and establishes some conditions under which the latter is superior to the former. Inertial behavior relates to an agent who, facing costs of adjustments, considers at any time the option of updating the...

The distinction between transitory and permanent shocks bears important implications for economic analysis in general, and for forecasting and policy issues in particular. This distinction is at the centre of the debate on which class of models is best suited to represent economic variables:...