7. Animal Spirits, Persistent Unemployment, and the Belief Function

2013 ◽  
pp. 251-276 ◽  
Author(s):  
Roger E. A. Farmer
Author(s):  
Roger E. A. Farmer

This chapter examines the persistence of unemployment by drawing from John Maynard Keynes' two central ideas. The first idea is that any unemployment rate can persist as an equilibrium. The second is that the unemployment rate that prevails is determined by animal spirits. The chapter introduces a three-equation monetary model termed “Farmer monetary model,” which replaces the New Keynesian Phillips curve with a belief function that describes how agents form expectations of future nominal income. The chapter builds and estimates the Farmer monetary model using U.S. data for the period from the first quarter of 1952 to the fourth quarter of 2007. It compares the Farmer monetary model to a New Keynesian model by computing the posterior odds ratio. It shows that the posterior odds favor the Farmer monetary model and concludes by discussing the implications of this finding for fiscal and monetary policy.


Author(s):  
Jianping Fan ◽  
Jing Wang ◽  
Meiqin Wu

The two-dimensional belief function (TDBF = (mA, mB)) uses a pair of ordered basic probability distribution functions to describe and process uncertain information. Among them, mB includes support degree, non-support degree and reliability unmeasured degree of mA. So it is more abundant and reasonable than the traditional discount coefficient and expresses the evaluation value of experts. However, only considering that the expert’s assessment is single and one-sided, we also need to consider the influence between the belief function itself. The difference in belief function can measure the difference between two belief functions, based on which the supporting degree, non-supporting degree and unmeasured degree of reliability of the evidence are calculated. Based on the divergence measure of belief function, this paper proposes an extended two-dimensional belief function, which can solve some evidence conflict problems and is more objective and better solve a class of problems that TDBF cannot handle. Finally, numerical examples illustrate its effectiveness and rationality.


SpringerPlus ◽  
2016 ◽  
Vol 5 (1) ◽  
Author(s):  
Kaijuan Yuan ◽  
Fuyuan Xiao ◽  
Liguo Fei ◽  
Bingyi Kang ◽  
Yong Deng

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