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COVID19 and the Economy

April 23, 2020

The models forecasting accuracy is quite a useful tool for evaluating not only the models, but also the underlying theories behind them. Yet, we need to keep in mind that it is a joint evaluation of the underlying theories behind the model as well as the model building skills of the forecasters. Hence, a model forecasting failure is attributable to one of three reasons: 1. Good theory, bad modelling. 2. Good modelling, bad theory. 3. And the worst of all possibilities: bad theory and bad modelling skills. The analysis of the Corona Virus and the policies adopted allows us to assess what worked and what did not and perhaps even why. All of this has an economic parallel. We can look at the economic policies responses to the virus through the lens of alternative economic views and consider some simple models based on these views or theories and then determine which model more accurately explains an perhaps forecast the impact of the economic policies adopted in response to the COVID19 pandemic. It is instructive to consider how these alternative views shaped the policy response. Equally important is to determine whether these policies achieved the desired objective and or whether there was a better way.

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The ValueTiming™ strategy is based on the assumption that politicians and policymakers have particular views of the world, and that they will in general adopt policy measures that are consistent with these views.

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